El Nino and World Primary Commodity Prices: Warm Water or Hot Air?

December 1, 2000

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the historical effects of the El Niño-Southern Oscillation (ENSO) cycle on world prices and economic activity. The analysis indicates that ENSO has economically-important and statistically-significant effects on world real commodity prices. A one-standard-deviation positive surprise in ENSO, for example, raises real commodity price inflation about 3-1/2 to 4 percentage points. Moreover, ENSO appears to account for almost 20 percent of commodity price inflation movements over the past several years. ENSO also has some explanatory power for world consumer price inflation and world economic activity, accounting for about 10 to 20 percent of movements in those variables.

Subject: Agricultural commodities, Commodities, Commodity prices, Consumer prices, Inflation, Prices

Keywords: Agricultural commodities, commodity, Commodity prices, Consumer prices, El Niño, El Nino southern oscillation, ENSO, ENSO cycle, ENSO event, ENSO intensity, ENSO measure, ENSO shock, Inflation, inflation movement, price, primary commodity prices, South America, WP

Pages:
34
Volume:
2000
DOI:
https://doi.org/10.5089/9781451874440.001
Issue:
203
Series:
Working Paper No. 2000/203
Stock No:
WPIEA2032000
ISBN:
9781451874440
ISSN:
1018-5941

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