Commodity Prices Exposure to Changing ENSO Patterns

Marc Pourroy (), Gilles Dufrénot () and William Ginn ()
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Marc Pourroy: LéP [Poitiers] - Laboratoire d'économie de Poitiers [UR 13822] - UP - Université de Poitiers = University of Poitiers, Axe 1 (2022-2027) : "Vulnérabilités et risques" (MSHS Poitiers) - MSHS de Poitiers [Maison des sciences de l'homme et de la société de Poitiers] - Maison des sciences humaines et sociales de Poitiers [UAR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique
Gilles Dufrénot: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
William Ginn: LabCorp

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Abstract: El Ni˜no–Southern Oscillation (ENSO) is a major climate phenomenon that influences tem-perature and precipitation across the globe. We study the effect of changing ENSO patterns on commodity prices using a Global Factor Local Projections (GFALP) model. Firstly, we demonstrate that unanticipated ENSO movements contribute to commodity price volatility asymmetrically during El Ni˜no and La Ni˜na periods. Secondly, climate change might disrupt ENSO patterns. We compare the current situation with potential climate change outcomes to evaluate its impact on commodity price stability. We compute an index measuring commodity price exposure to these disruptions. We demonstrate that in most cases, these shifts exacer-bate commodity price volatility. Finally, we explore several avenues to explain the observed heterogeneity in the exposure of commodity prices to the evolution of ENSO that could result from climate change, and we highlight the crucial role of international commodity markets in adapting to climate change.

Keywords: ENSO; Commodity Price; Climate Change; Agriculture; Energy (search for similar items in EconPapers)
Date: 2024-06-17
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Published in 72ème congrès de l'Association Française de Science Economique, Association Française de Science Economique, Jun 2024, Bordeaux, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05353584

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