The ENSO Cycle and Forecastability of Global Inflation and Output Growth: Evidence from Standard and Mixed-Frequency Multivariate Singular Spectrum Analyses

Hossein Hassani, Mohammad Yeganegi and Rangan Gupta
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Hossein Hassani: The Research Institute of Energy Management and Planning (RIEMP), University of Tehran, No. 9, Ghods St., Tehran, Iran
Mohammad Yeganegi: Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran

No 202169, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper the role of the El Nino-Southern Oscillation (ENSO), measured by the Equatorial Southern Oscillation Index (EQSOI), is used to formally forecast the inflation and GDP growth rates of the United States (US), advanced (excluding the US) and emerging countries, as well as the world economy (barring the US). We rely on univariate and multivariate Singular Spectrum Analyses (SSA), as well as mixed-frequency version of the latter since the EQSOI is monthly, while GDP is available only at quarterly frequency unlike monthly inflation rates. We find statistically significant evidence of the ability of the EQSOI in forecasting inflation and GDP growth rates of the four economic blocs, though there are exceptions in terms of forecasting gains associated with inflation rate of emerging economies and the growth rate of the US. Our results have important implications for policymakers.

Keywords: GDP growth; Inflation; ENSO; Forecastibility; Mixed-Frequency Multivariate SSA; Continuous Wavelet Transform (search for similar items in EconPapers)
JEL-codes: C22 C32 E31 E32 E37 Q54 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2021-10
New Economics Papers: this item is included in nep-for, nep-mac and nep-mon
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Journal Article: The ENSO cycle and forecastability of global inflation and output growth: Evidence from standard and mixed‐frequency multivariate singular spectrum analyses (2023)
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