How Volatile is ENSO

31 Pages Posted: 2 Aug 2009 Last revised: 4 Sep 2009

See all articles by Lan-Fen Chu

Lan-Fen Chu

The Institute of Economics, Academia Sinica

Michael McAleer

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute; Tinbergen Institute; University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Chi-Chung Chen

National Chung Hsing University

Date Written: August 1, 2009

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 ENSO volatility. 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. Moreover, 1998 is a turning point for the volatility of SOI, and the ENSO volatility has became stronger since 1998 which indicates that the ENSO strength has increased.

Keywords: ENSO, SOI, SOT, Volatility, GARCH, GJR, EGARCH

JEL Classification: Q25, Q29, C22

Suggested Citation

Chu, Lan-Fen and McAleer, Michael and Chen, Chi-Chung, How Volatile is ENSO (August 1, 2009). Available at SSRN: https://ssrn.com/abstract=1442229 or http://dx.doi.org/10.2139/ssrn.1442229

Lan-Fen Chu

The Institute of Economics, Academia Sinica ( email )

128 Academia Road, Section 2, Nankang
Taipei, 115
Taiwan

Michael McAleer (Contact Author)

Erasmus University Rotterdam - Erasmus School of Economics, Econometric Institute ( email )

Rotterdam
Netherlands

Tinbergen Institute

Rotterdam
Netherlands

University of Tokyo - Centre for International Research on the Japanese Economy (CIRJE), Faculty of Economics

Tokyo
Japan

Chi-Chung Chen

National Chung Hsing University

402, No. 250 Kuo Kuang Road, Taiwan
Taichung, Taiwan
China