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Carbon emissions and sustainability in Covid-19's waves: evidence from a two-state dynamic Markov-switching
Konstantinos N Konstantakis1, Panayotis G Michaelides2, Panos Xidonas3
1Hellenic Open University, Patras, Greece.
Abstract:
Throughout the world, carbon emissions have decreased in an unprecedented way as a result of the Covid-19 pandemic. The purpose of this paper is to investigate whether a rebound effect in carbon emissions is anticipated following the extraction of information related to the beliefs of investors. A suitable Markov switching model is used in this paper to adapt the safe haven financial methodology to an environmental sustainability perspective. Analytically, the aforementioned situation is modeled by estimating a two-state dynamic Markov-Switching Regression (MSR), with a state-dependent intercept term to capture the dynamics of the series, across unobserved regimes. In light of the results of the research and the robustness checks, investors are anticipating a rebound effect on the total quantity of carbon emissions.
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