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Climate pattern effects on global economic conditions

Author

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  • Gilles Dufrénot

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • William Ginn

    (LabCorp, Coburg University of Applied Sciences and Arts)

  • Marc Pourroy

    (LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers)

Abstract

This study investigates how El Niño–Southern Oscillation (ENSO) climate patterns affect global economic conditions. Prior research suggests that ENSO phases, particularly El Niño, influence economic outcomes, but with limited consensus on their broader macroeconomic impacts. Using a novel monthly dataset from 20 economies, covering 80% of global output from 1999 to 2022, we employ a global augmented vector autoregression with local projections (GAVARLP) model. The empirical findings suggest that El Niño boosts output with minimal inflationary effects, reducing global economic policy uncertainty, while La Niña raises food inflation, which can amplify aggregate inflation as a ‘‘second-round'' effect, amplifying uncertainty. These findings shed light on the transmission channels of climate shocks and highlight the significant role of ENSO in shaping global economic conditions, emphasizing why climate shocks should be a concern for policy markers.

Suggested Citation

  • Gilles Dufrénot & William Ginn & Marc Pourroy, 2024. "Climate pattern effects on global economic conditions," Post-Print hal-04828849, HAL.
    • Handle: RePEc:hal:journl:hal-04828849
    DOI: 10.1016/j.econmod.2024.106920
    Note: View the original document on HAL open archive server: https://hal.science/hal-04828849v1
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