Working Paper BETA #2019-27

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Title : Reexamining the growth effects of ENSO: the role of local weather conditions

Author(s) : Cécile Couharde, Olivier Damette, Rémi Generoso, Kamiar Mohaddes

Abstract : This paper examines the growth effects of ENSO events through their interactions with local weather conditions using the Standardized Precipitation and Evapotranspiration Index (SPEI) from 1975 to 2014 and over a sample of 74 countries. The inclusion of SPEI in panel estimation makes it possible to control for time-varying country-specific effects of ENSO events, therefore outlining their heterogeneous effects on growth and eliminating a potential source of omitted-variable bias. By better identifying the persistence of ENSO effects on local weather conditions, we evidence that ENSO events generate heterogeneous and local effects depending not only on countries’ climate regime but also on their weather patterns. Our results suggest that examining the growth effects of ENSO events should thus explicitly account for their interaction with weather patterns to capture more precisely the heterogeneity across countries.

Key-words : Economic growth, ENSO events, Weather conditions

JEL Classification : C33 O13 Q54