Do natural disasters and the announcement of ENSO events have an impact on market-based measures of inflation expectations?

Number: 
1315
DOI: 
https://doi.org/10.32468/be.1315
Published: 
Authors:
Luis Fernando Melo-Velandiaa,
Daniel Parra-Amadoa,
Juan Pablo Bermúdez-Cespedese
Classification JEL: 
C58, C4, E31, Q54
Keywords: 
natural disasters (22370), Inflation Expectations (12268), GARCH (12628), Event Study (14720)
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Abstract


This research investigates the influence of natural disasters and climate-related announcements, particularly those associated with the El Niño Southern Oscillation (ENSO), on inflation expectations within the Colombian economy. Employing an event study framework, we analyze daily data on inflation expectations derived from the Colombian public debt market spanning October 2004 to August 2022, in conjunction with the Emergency Events Database (EM-DAT) and ENSO announcements from international agencies. Our findings provide evidence that both types of events significantly influence the mean of the inflation expectations. Moreover, while natural disasters increase the volatility of inflation expectations, ENSO announcements do not exhibit a similar effect.