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The Response of CO2 Emissions to Macroeconomic Shocks - A Panel VAR Analysis

Author

Listed:
  • Nadeen Omar

    (German University in Cairo)

  • Jens Klose

    (THM Business School)

Abstract

Global efforts towards mitigating climate change are gaining momentum, with reducing carbon dioxide (CO2) emissions and aiming for carbon neutrality being the main goals. Economic factors are major determinants of CO2 emissions coming from production and energy consumption. This paper empirically estimates these economic effects using an unbalanced panel of 78 countries with annual data from 1990 to 2022. We employ a panel vector autoregression (VAR) model to show the dynamic response of CO2 emissions to various macroeconomic variables, including population, GDP, investment, trade, oil prices, renewable energy consumption, inflation, effective exchange rates, and nominal interest rates. Extensive robustness checks account for panel heterogeneity by splitting the sample based on geography, income levels, population density, and emission levels. The results show significant responses of CO2 emissions to shocks from population growth, GDP growth, renewable energy consumption, and interest rates.

Suggested Citation

  • Nadeen Omar & Jens Klose, 2024. "The Response of CO2 Emissions to Macroeconomic Shocks - A Panel VAR Analysis," MAGKS Papers on Economics 202405, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:202405
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    CO2 emissions; climate change; energy consumption; economic growth; panel VAR;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment

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