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

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  • Julien Chevallier

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.

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  • Julien Chevallier, 2021. "Covid-19 Outbreak and CO2 Emissions: Macro-Financial Linkages," Working Papers 2021-004, Department of Research, Ipag Business School.
    • Handle: RePEc:ipg:wpaper:2021-004
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    Cited by:

    1. Rafał Nagaj & Brigita Žuromskaitė, 2021. "Tourism in the Era of Covid-19 and Its Impact on the Environment," Energies, MDPI, vol. 14(7), pages 1-18, April.
    2. Mohamed Yousfi & Abderrazak Dhaoui & Houssam Bouzgarrou, 2021. "Risk Spillover during the COVID-19 Global Pandemic and Portfolio Management," JRFM, MDPI, vol. 14(5), pages 1-29, May.
    3. Shah, Muhammad Ibrahim & Foglia, Matteo & Shahzad, Umer & Fareed, Zeeshan, 2022. "Green innovation, resource price and carbon emissions during the COVID-19 times: New findings from wavelet local multiple correlation analysis," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    4. Fares Almomani & Amera Abdelbar & Sophia Ghanimeh, 2023. "A Review of the Recent Advancement of Bioconversion of Carbon Dioxide to Added Value Products: A State of the Art," Sustainability, MDPI, vol. 15(13), pages 1-30, July.
    5. Md. Bokhtiar Hasan & Masnun Mahi & Tapan Sarker & Md. Ruhul Amin, 2021. "Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector," JRFM, MDPI, vol. 14(5), pages 1-18, May.
    6. Jawadi, Fredj & Rozin, Philippe & Bourghelle, David, 2023. "Insights into CO2 emissions in Europe in the context of COVID-19: A panel data analysis," International Economics, Elsevier, vol. 173(C), pages 164-174.
    7. Tsai, I-Chun, 2022. "Changes in social behavior and impacts of the COVID-19 pandemic on regional housing markets: Independence and risk," Journal of Behavioral and Experimental Finance, Elsevier, vol. 35(C).

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    More about this item

    Keywords

    Covid-19; CO2 emissions; time-varying correlations; macroeconomy; stock markets; DCC MIDAS;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F30 - International Economics - - International Finance - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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