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How Volatile is ENSO?

Author

Listed:
  • LanFen Chu

    (Institute of Economics, Academia Sinica)

  • Michael McAleer

    (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)

  • Chi-Chung Chen

    (Department of Applied Economics, National Chung Hsing University)

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.

Suggested Citation

  • LanFen Chu & Michael McAleer & Chi-Chung Chen, 2010. "How Volatile is ENSO?," KIER Working Papers 729, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:729
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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP729.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    ENSO; SOI; SOT; Greenhouse Gas Emissions; Volatility; GARCH; GJR; EGARCH.;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; 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

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