Dependence structure between business cycles and CO2 emissions in the U.S.: Evidence from the time-varying Markov-Switching Copula models

Giray Gözgör, Aviral Tiwari, Naceur Khraief and Muhammad Shahbaz

Energy, 2019, vol. 188, issue C

Abstract: The relationship between CO2 emissions and economic growth is well-examined. However, there is a gap in the literature to examine the nexus by regime-switching models. For this purpose, this paper examines the interdependence relations between CO2 emissions and the industrial production index as a measure of business cycles at the monthly frequency in the United States. We use a new approach to modeling dependence between the underlying variables over time, combining the time-varying copula and the Markov switching models. We find that there is a significant dependence structure between business cycles and CO2 emissions, which has a regime-switching feature, for the period from January 1973 to January 2017. Specifically, during the recession episodes, we deduce that until 1982, the high dependence regime with the Gaussian copula is valid. Since the beginning of 1983, the low dependence structure regime becomes prominent.

Keywords: Carbon dioxide emissions; Business cycles; Markov-switching models; Copula models; Regime-dependency (search for similar items in EconPapers)
JEL-codes: C58 E32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Working Paper: Dependence Structure between Business Cycles and CO2 Emissions in the U.S.: Evidence from the Time-Varying Markov-Switching Copula Models (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:188:y:2019:i:c:s0360544219316895

DOI: 10.1016/j.energy.2019.115995

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