Solar events and economic activity: Evidence from the US Telecommunications industry (1996–2014)

Abstract

Although the impact of solar events on economic activity appears to be of great importance, very limited work has been done, so far, on the subject. In this work, we examine the impact of geomagnetic anomalies, caused by solar weather, on Earth’s economic activity, and more precisely, on the US telecommunication sector, for the period January 1996–December 2014. We find that the solar Dst index is Granger causal for the US telecommunication output, which means that the Dst index has predictive ability for the evolution of output in the US Telecommunication sector. Furthermore, by the step-by-step approach, we identify the specific lags of the Dst index, for which causality is present. Furthermore, for every out-of-sample forecasting horizon, the comparison of the various measures of forecasting ability for both best models, baseline and alternative model respectively, shows that the alternative is better in terms of its forecasting ability, which means that the Dst index provides information for the forecasting of the U.S. telecommunications output. These results give credit to the impact of solar events on the US Telecommunications industry.