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How Volatile is ENSO for Global Greenhouse Gas Emissions and the Global Economy?

  • Chu, L-F.
  • McAleer, M.J.
  • Chen, C-C.

This paper analyzes two indexes in order to capture the volatility inherent in El Niños Southern Oscillations (ENSO), develops the relationship between the strength of ENSO and greenhouse gas emissions, which increase as the economy grows, with carbon dioxide being the major greenhouse gas, and examines how these gases affect the frequency and strength of El Niño on the global economy. 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, and 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 Sea Surface Temperature (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 even stronger El Nino or La Nina effects in the future if global greenhouse gas emissions continue to increase unabated.

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File URL: http://repub.eur.nl/pub/38689/EI2012-33.pdf
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Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2012-33.

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Date of creation: 01 Sep 2012
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Handle: RePEc:ems:eureir:38689
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Web page: http://www.eur.nl/ese

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  1. Chen, Chi-Chung & McCarl, Bruce A., 2000. "The Value Of Enso Information To Agriculture: Consideration Of Event Strength And Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
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  15. Allan D. Brunner, 2000. "El Nino and World Primary Commodity Prices; Warm Water or Hot Air?," IMF Working Papers 00/203, International Monetary Fund.
  16. Bruce E. Hansen, 2001. "The New Econometrics of Structural Change: Dating Breaks in U.S. Labour Productivity," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 117-128, Fall.
  17. Carrasco, Marine & Chen, Xiaohong, 2002. "Mixing And Moment Properties Of Various Garch And Stochastic Volatility Models," Econometric Theory, Cambridge University Press, vol. 18(01), pages 17-39, February.
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