How Volatile is ENSO?

LanFen Chu, Michael McAleer and Chi-Chung Chen
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LanFen Chu: Institute of Economics, Academia Sinica, Taipei, Taiwan.
Chi-Chung Chen: Department of Applied Economics, National Chung Hsing University

No 2011-21, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: The El Niños Southern Oscillations (ENSO) is a periodical phenomenon of climatic interannual variability, which could be measured through either the Southern Oscillation Index (SOI) or the Sea Surface Temperature (SST) Index. The main purpose of this paper is to analyze these two indexes in order to capture the volatility inherent in ENSO. The empirical results show that both the ARMA(1,1)-GARCH(1,1) and ARMA(3,2)-GJR(1,1) models are suitable for modelling ENSO volatility accurately. The empirical results show that 1998 is a turning point, which indicates that the ENSO strength has increased since 1998. Moreover, the increasing ENSO strength is due to the increase in greenhouse gas emissions. The ENSO strengths for SST are predicted for the year 2030 to increase from 29.62% to 81.5% if global CO2 emissions increase by 40% to 110%, respectively. This indicates that we will be faced with an even stronger El Nino or La Nina in the future if global greenhouse gas emissions continue to increase unabated.

Keywords: ENSO; SOI; SOT; Greenhouse Gas Emissions; Volatility; GARCH; GJR; EGARCH. (search for similar items in EconPapers)
Pages: 32 pages
Date: 2011
New Economics Papers: this item is included in nep-ene and nep-env
Note: The authors are most grateful to the Editor and three referees for helpful comments and suggestions. The second author acknowledges the financial support of the Australian Research Council, National Science Council, Taiwan, and the Japan Society for the Promotion of Science.
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https://eprints.ucm.es/id/eprint/12871/1/1121.pdf Revised June 2011 (application/pdf)

Related works:
Working Paper: How Volatile is ENSO? (2010)
Working Paper: How Volatile is ENSO? (2010)
Working Paper: How Volatile is ENSO? (2009)
Working Paper: How Volatile is ENSO? (2009)
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