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

  • Lan-Fen Chu

    (National Science and Technology Center for Disaster Taiwan)

  • M. McAleer

    (Econometric Institute Erasmus School of Economics Erasmus University Rotterdam and Institute of Economic Research Kyoto University andDepartment of Quantitative Economics Complutense University of Madrid)

  • Chi-Chung Chen

    (Department of Applied Economics National Chung Hsing University Taiwan)

This paper analyzes two indexes in order to capture the volatility inherent in El Ninos 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 Nino 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://www.kier.kyoto-u.ac.jp/DP/DP829.pdf
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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 829.

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Length: 32pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:kyo:wpaper:829
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