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

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
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 long-distance 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 and more
important over shorter meteorological onsets.