El Nino and World Primary Commodity Prices: Warm Water or Hot Air?
AbstractThis paper examines the historical effects of El NiÃ±o on world prices and economic activity. Although the primary focus is on world real non-oil primary commodity prices, the effects on G-7 consumer price inflation and GDP growth are also considered. This paper has several distinct advantages over previous studies. First, several econometric models are estimated using fairly broad measures of prices and economic activity. Second, the models include continuous measures of El NiÃ±o intensity (sea surface temperature and sea-level air pressure anomalies in the Pacific Ocean) rather than dummy variable measures. Finally, confidence intervals are constructed for all estimated effects of El NiÃ±o on world prices and economic activity. ; The analysis indicates that El NiÃ±o has economically-important and statistically-significant effects on world real commodity prices. A one-standard-deviation surprise in El NiÃ±o, for example, raises real commodity price inflation about 3-1/2 to 4 percentage points. Moreover, El NiÃ±o appears to account for over 20 percent of commodity price inflation movements over the past several years. El NiÃ±o also has some explanatory power for world consumer price inflation and world economic activity, accounting for about 10 to 15 percent of movements in those variables.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 00/203.
Date of creation: 01 Dec 2000
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Other versions of this item:
- Allan D. Brunner, 2002. "El Niño and World Primary Commodity Prices: Warm Water or Hot Air?," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 176-183, February.
- Allan D. Brunner, 1998. "El Nino and world primary commodity prices: warm water or hot air?," International Finance Discussion Papers 608, Board of Governors of the Federal Reserve System (U.S.).
- NEP-ALL-2013-02-16 (All new papers)
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