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How Volatile is ENSO?

Author

Listed:
  • LanFen Chu

    (Institute of Economics, Academia Sinica, Taipei, Taiwan.)

  • Michael McAleer

    (Econometrisch Instituut (Econometric Institute), Faculteit der Economische Wetenschappen (Erasmus School of Economics), Erasmus Universiteit, Tinbergen Instituut (Tinbergen Institute).)

  • 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, 2011. "How Volatile is ENSO?," Documentos de Trabajo del ICAE 2011-21, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    • Handle: RePEc:ucm:doicae:1121
    Note: The authors are most grateful to the Editor and three referees for helpful comments and suggestions. The second author acknowledges the financial support of the Australian Research Council, National Science Council, Taiwan, and the Japan Society for the Promotion of Science.
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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.;
    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
    • 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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