The Effect of ENSO Shocks on Commodity Prices: A Multi-Time Scale Approach
Gilles Dufrénot (),
William Ginn () and
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William Ginn: Adidas, Economist, Germany, https://www.linkedin.com/in/williamginn
No 2130, AMSE Working Papers from Aix-Marseille School of Economics, France
We investigate the effect of changing ENSO patterns on global commodity prices, including energy, metals/minerals and agriculture real commodity price subsets, while controlling for global economic output and interest rate via a global factor local projections (GFALP) model. We study the responses to climate shocks using a nonlinear multivariate model to assess differential effects across ENSO climate regimes. We find that commodity inflation is reactive to El Niño and La Niña events, but that this sensitivity can occur either in the short-or long-term depending on the commodity under investigation. For commodities in agriculture, we uncover an asymmetric influence of El Niño and La Niña shocks. More central banks are questioning whether climate change is part of their mission to stabilize prices. Our results indicate the existence of a direct link between weather anomalies and commodity inflation, one that should be integrated into the central banks' inflation targeting framework.
Keywords: ENSO; weather; commodity price; agriculture; energy (search for similar items in EconPapers)
JEL-codes: C32 F44 O13 Q54 (search for similar items in EconPapers)
Pages: 28 pages
New Economics Papers: this item is included in nep-agr and nep-env
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Working Paper: The Effect of ENSO Shocks on Commodity Prices: A Multi-Time Scale Approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2130
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