The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.