Fair Weather or Foul? The Macroeconomic Effects of El Niño

Paul Cashin (), Kamiar Mohaddes and Mehdi Raissi

No 2015/089, IMF Working Papers from International Monetary Fund

Abstract: This paper employs a dynamic multi-country framework to analyze the international macroeconomic transmission of El Niño weather shocks. This framework comprises 21 country/region-specific models, estimated over the period 1979Q2 to 2013Q1, and accounts for not only direct exposures of countries to El Niño shocks but also indirect effects through thirdmarkets. We contribute to the climate-macroeconomy literature by exploiting exogenous variation in El Niño weather events over time, and their impact on different regions crosssectionally, to causatively identify the effects of El Niño shocks on growth, inflation, energy and non-fuel commodity prices. The results show that there are considerable heterogeneities in the responses of different countries to El Niño shocks. While Australia, Chile, Indonesia, India, Japan, New Zealand and South Africa face a short-lived fall in economic activity in response to an El Niño shock, for other countries (including the United States and European region), an El Niño occurrence has a growth-enhancing effect. Furthermore, most countries in our sample experience short-run inflationary pressures as both energy and non-fuel commodity prices increase. Given these findings, macroeconomic policy formulation should take into consideration the likelihood and effects of El Niño weather episodes.

Keywords: WP; El Niño shock; primary sector; El Niño weather shocks; oil and non-fuel commodity prices; global macroeconometric modeling; international business cycle; El Niño event; El Niño weather shock; El Niño-economy relationship; El Niño condition; El Niño year; Commodity prices; Inflation; Oil prices; Vector autoregression; Natural disasters; Global; Europe; Africa; South America; Asia and Pacific (search for similar items in EconPapers)
Pages: 30
Date: 2015-04-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=42841 (application/pdf)

Related works:
Journal Article: Fair weather or foul? The macroeconomic effects of El Niño (2017)
Working Paper: Fair weather or foul? the macroeconomic effects of El Niño (2015)
Working Paper: Fair Weather or Foul? The Macroeconomic Effects of El Niño (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2015/089

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().