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Competence Centre on Microeconomic Evaluation (CC-ME)

We advise and support EU policy making through ex-post causal evaluation and data-driven microeconomic analysis.

  • Page | 19 Feb 2025

Blog post: CC-ME Seminar Series with Corinna Ghirelli

Seminar topic: “El Niño” and “La Niña”: Revisiting the Impact on Food Commodity Prices and Euro Area Consumer Prices

At the Competence-Centre on Microeconomic Evaluation (CC-ME) we advise and support EU policy making through ex-post causal evaluation and data-driven microeconomic analysis.

The CC-ME hosts a Microeconometric Seminar Series to promote discussions with external researchers from academia and other institutions.

Our Seminar Series is intended to disseminate advanced research methodologies and topics in the field of microeconomic evaluation. To further disseminate the benefits of our Series across the JRC, we post a summary of the presented papers together with the presenters' views and opinions on their research and the future of the field of Applied Economics.

Visit the Seminar Series page

Last week we had the pleasure of having Corinna Ghirelli from the Bank of Spain present her work: “El Niño” and “La Niña”: Revisiting the Impact on Food Commodity Prices and Euro Area Consumer Prices.  

In her work, Ms. Ghirelli and her coauthors challenge the prevailing assumption that the intensification of the weather phenomena known as El Niño and La Niña generally exert upward and downward pressures, respectively, on international food commodity prices that, in turn, affect consumer prices even in distant jurisdictions such as Europe. 

As regards the first point, they show that there are nuances that have to do with composition effects (the type of commodity) and sample periods, in such a way that the impact is weaker nowadays and, in some cases, may even change sign. With regard to the second point, and focusing on consumer price inflation in the euro area and its four largest constituent countries (Germany, France, Italy, and Spain), they show that it is crucial to account for the mitigating and sample-period-specific role of domestic agricultural policies (in the euro area, the European Union’s Common Agricultural Policy, CAP). 

To carry out their analysis, they construct a detailed database for the 1970–2023 period and use a local projections empirical framework. Among other results, they show that when using a sample period that starts at the time of the creation of the euro area (in the late 1990s), an intensification of El Niño actually decreases euro area headline inflation by about 0.3 percentage points (pp) after 12 months, while La Niña increases it by 0.6 pp over the same horizon. 

They explain their results on the basis of the aforementioned factors: composition effects, sample periods, and the CAP.

To learn more about Corinna Ghirelli 's work and opinions about the future of the field of Applied Economics we asked her to briefly answer a series of questions. You can find hersnswers to each of our questions below.

Q: What attracted you to research the topics in your paper?

A: My main task at the bank of Spain is to follow the Eurosystem forecasting exercise and gather informed material about the current and foreseen outlook to prepare the governor before the monetary policy meetings in Frankfurt. In this context, I have been following closely the current inflationary crisis and the monetary tightening measures undertaken by the ECB. In the recent discussions, El Niño shocks, among others, were frequently mentioned as possible upward risks for euro area inflation, even though most of the evidence referred to international food prices. This pushed us to investigate this issue further.

Q: Where is the research area where your paper fits moving?

A: Impact of natural disasters related to climate change, amplification/reduction of El Nino due to climate change, more detail about the channels behind this impact unveiling food trade relation between countries. Studying more in detail the pass through from food inflation to headline inflation, identifying the contribution of salaries and profit margins in this process. 

Q: What, in your opinion, will the next breakthrough in Applied Economics be?

A: Apply Artificial intelligence to fine tune economic models and help unveiling new sources of (big) data to be processed.

 

The CC-ME team would like to congratulate Corinna Ghirelli for her insightful research and thank her for presenting it in our Seminar Series.

For more information on the upcoming presentations and how to participate in our Seminar Series please visit our dedicated website.