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The ENSO Cycle and Forecastability of Global Inflation and Output Growth: Evidence from Standard and Mixed-Frequency Multivariate Singular Spectrum Analyses

Author

Listed:
  • Hossein Hassani

    (The Research Institute of Energy Management and Planning (RIEMP), University of Tehran, No. 9, Ghods St., Tehran, Iran)

  • Mohammad Reza Yeganegi

    (Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

In this paper the role of the El Nino-Southern Oscillation (ENSO), measured by the Equatorial Southern Oscillation Index (EQSOI), is used to formally forecast the inflation and GDP growth rates of the United States (US), advanced (excluding the US) and emerging countries, as well as the world economy (barring the US). We rely on univariate and multivariate Singular Spectrum Analyses (SSA), as well as mixed-frequency version of the latter since the EQSOI is monthly, while GDP is available only at quarterly frequency unlike monthly inflation rates. We find statistically significant evidence of the ability of the EQSOI in forecasting inflation and GDP growth rates of the four economic blocs, though there are exceptions in terms of forecasting gains associated with inflation rate of emerging economies and the growth rate of the US. Our results have important implications for policymakers.

Suggested Citation

  • Hossein Hassani & Mohammad Reza Yeganegi & Rangan Gupta, 2021. "The ENSO Cycle and Forecastability of Global Inflation and Output Growth: Evidence from Standard and Mixed-Frequency Multivariate Singular Spectrum Analyses," Working Papers 202169, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202169
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    More about this item

    Keywords

    GDP growth; Inflation; ENSO; Forecastibility; Mixed-Frequency Multivariate SSA; Continuous Wavelet Transform;
    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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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