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Covid-19 Outbreak and CO2 Emissions: Macro-Financial Linkages

Julien Chevallier

No 2021-004, Working Papers from Department of Research, Ipag Business School

Abstract: In the Dynamic Conditional Correlation with Mixed Data Sampling (DCC-MIDAS) framework, we scrutinize the correlations between the macro-financial environment and CO2 emissions in the aftermath of the Covid-19 diffusion. The main original idea is that the economy?s lock-down will alleviate part of the greenhouse gases? burden that human activity induces on the environment. We capture the time-varying correlations between U.S. Covid-19 confirmed cases, deaths, and recovered cases that were recorded by the Johns Hopkins Coronavirus Center, on the one hand; U.S. Total Industrial Production Index and Total Fossil Fuels CO2 emissions from the U.S. Energy Information Administration on the other hand. High-frequency data for U.S. stock markets are included with five-minute realized volatility from the Oxford-Man Institute of Quantitative Finance. The DCC-MIDAS approach indicates that Covid-19 confirmed cases and deaths negatively influence the macro-financial variables and CO2 emissions. We quantify the time-varying correlations of CO2 emissions with either Covid-19 confirmed cases or Covid-19 deaths to sharply decrease by ?15% to ?30%. The main takeaway is that we track correlations and reveal a recessionary outlook against the background of the pandemic.

Keywords: Covid-19; CO2 emissions; time-varying correlations; macroeconomy; stock markets; DCC MIDAS (search for similar items in EconPapers)
JEL-codes: F30 G01 Q54 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2021-01-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-mac
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