How Volatile is ENSO?
AbstractThe 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.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 10/31.
Length: 34 pages
Date of creation: 01 Apr 2010
Date of revision:
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ENSO; SOI; SOT; Greenhouse Gas Emissions; Volatility; GARCH; GJR; EGARCH;
Other versions of this item:
- LanFen Chu & Michael McAleer & Chi-Chung Chen, 2010. "How Volatile is ENSO?," KIER Working Papers 729, Kyoto University, Institute of Economic Research.
- LanFen Chu & Michael McAleer & Chi-Chung Chen, 2009. "How Volatile is ENSO?," CIRJE F-Series CIRJE-F-635, CIRJE, Faculty of Economics, University of Tokyo.
- LanFen Chu & Michael McAleer & Chi-Chung Chen, 2011. "How Volatile is ENSO?," Documentos del Instituto Complutense de AnÃ¡lisis EconÃ³mico 2011-21, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales.
- Chu, L. & McAleer, M.J. & Chen, C-C., 2009. "How Volatile is ENSO?," Econometric Institute Research Papers EI 2009-18, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-ENE-2010-06-04 (Energy Economics)
- NEP-ENV-2010-06-04 (Environmental Economics)
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