Odd Lots · Friday, August 14, 2026
New research indicates that El Niño events have a lasting impact on economic growth, going beyond temporary price level fluctuations. A study using observational data suggests that El Niño can systematically depress economic growth trajectories, leading to significant long-term losses that accrue over time, rather than being recovered in subsequent years.
“And so that's really crucial in this empirical setting of trying to identify, well, what's the effective in al Nino on an economy and how does that upward aggregate to a macroeconomic toll. What you can do is just take a bunch of data of something like gross domestic product, which is summarizing all economic productivity, goods and services produced by an economy. We have pretty good data on that at the country scale for a pretty long amount of time, and you can look at differences in that economic growth. So how did economic growth vary from year to year? So you're not looking at absolute levels of GDP, You're looking at changes in economic growth as embedded in changes in GDP. And then you can look at something like al nino as a treatment. And then you have another source of variation, which is that not every country is equally linked to al Nino physically.”
“What we find in this empirical research is that observationally, Almino seems to systematically depress growth, meaning your country is growing at a race and then an al Nino occurs, and then you are growing on a different trajectory, and so those losses just accrue add infinitum in time. And that is a distinct finding that what was previously understood about al nino.”
“But what we actually found is that there was empirical evidence for a systematic depression of economic growth and over a five year period that amounts to about five point seven trillion dollars in global economic losses instead by the year two thousand and three, right five years after the ninety seven ninety eight event.”