 The response of CO2 emissions to the business cycle: New evidence for the U.SEnergy Economics, 2020, vol. 85, issue C Abstract: This paper investigates the response of CO2 emissions to the business cycle for the U.S. on a monthly basis between 1973 and 2015. Using a rolling-regression approach, we find that the emissions elasticity with respect to GDP is not constant over time, irrespective which filtering method, such as the Hodrick-Prescott, the Baxter-King, the Christiano-Fitzgerald or the Butterworth filter has been employed. In order to check whether or not emissions react differently during normal and recession times, next, we employ a Markov-switching approach. We find, first, that emissions are significantly more elastic during recessions than in normal times. Second, depending on the filtering method, we also obtain parameter estimates of the emissions elasticity above one in recession times and below one in normal times. The results are also robust against including monetary policy also in times of the zero lower bound. Thus, environmental policy instruments not turning out to be sub-optimal should account for this asymmetric response of emissions due to changes in GDP. Keywords: Business cycle; CO2 emissions; Rolling-regression; Markov-switching (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:85:y:2020:i:c:s014098831930355x DOI: 10.1016/j.eneco.2019.104560 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
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