The Growth Effects of El Niño and La Niña: Local Weather Conditions Matter

Couharde, C., Damette, O., Generoso, R. and Mohaddes, K.

This paper contributes to the climate-economy literature by analysing the role of weather patterns in influencing the transmission of global climate cycles to economic growth. More specifically, we focus on El Niño Southern Oscillation (ENSO) events and their interactions with local weather conditions, taking into account the heterogeneous and cumulative effects of weather patterns on economic growth and the asymmetry and nonlinearity in the global influence of ENSO on economic activity. Using data on 75 “teleconnected” countries over the period 1975-2014, we provide evidence for the negative growth effects of ENSO events and show that there are substantial differences between its warm (El Niño) and cold (La Niña) phases and between climate zones. These differences are due to the heterogeneity in weather responses to ENSO events, known as teleconnections, which has so far not been taken into account by economists, and which will become more important in the climate-economy relationship given that climate change may substantially strengthen longdistance relationships between weather patterns around the world. We also show that the negative growth effects associated with these teleconnections are robust to the definition of ENSO events, to the use of alternative climatic variables and more important over shorter meteorological onsets.