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The Role of the Monthly ENSO in Forecasting the Daily Baltic Dry Index

Author

Listed:
  • Elie Bouri

    (Lebanese American University, Lebanon)

  • Rangan Gupta

    (University of Pretoria, South Africa)

  • Luca Rossini

    (University of Milan, Italy)

Abstract

Using Bayesian Reverse Unrestricted-Mixed Data Sampling (RU-MIDAS) models, we predict the daily Baltic Dry Index (BDI) based on the monthly information content of the El Nino Southern Oscillation (ENSO) from January, 1985 to February, 2022. The results show that the Oceanic Nino Index (ONI) capturing the ENSO produces statistically significant forecast gains in terms of both point and density forecasts for the BDI, relative to a constant-mean benchmark model, at both short and long forecast horizons (i.e., one to twenty one-day-ahead). Notably, these gains primarily emanate from the El Nino rather than La Nina phase of the ENSO.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Luca Rossini, 2022. "The Role of the Monthly ENSO in Forecasting the Daily Baltic Dry Index," Working Papers 202229, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202229
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    1. Alain Hecq & Marie Ternes & Ines Wilms, 2023. "Hierarchical Regularizers for Reverse Unrestricted Mixed Data Sampling Regressions," Papers 2301.10592, arXiv.org.

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    More about this item

    Keywords

    Baltic Dry Index (BDI); El Nino Southern Oscillation (ENSO); Reverse Unrestricted- Mixed Data Sampling (RU-MIDAS) Models; Forecasting;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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