A1358
Title: An analysis of CO2 emissions in Spain using many macroeconomic predictors
Authors: Pilar Poncela - Universidad Autonoma de Madrid (Spain) [presenting]
Esther Ruiz - Universidad Carlos III de Madrid (Spain)
Aranzazu de Juan - Universidad Autonoma de Madrid (Spain)
Abstract: The aim is to analyze how the (macro) economic activity in Spain affects CO2 emissions. To do so, we build an extensive database of macroeconomic predictors and proceed in two ways: on the one hand, we use variable selection techniques to find a small set of economic predictors with a higher correlation with CO2 emissions and analyze the resulting relations. On the other hand, we build a dynamic factor model with a large dataset of macroeconomic predictors. The extracted common factors capture macroeconomic conditions in Spain. In the second step, we check the relation of the common factors with CO2 emissions. We also estimate joint models that incorporate both the common factors and the individual predictors as explanatory variables of CO2 emissions. Our results indicate that private consumption, industrial production and maritime transport are the most significant variables in order to explain C02 emissions. Once these individual predictors are considered, the information contained in the macroeconomic data set only has negligible explanatory power for emissions. Finally, we generate 1-step ahead forecasts of C02 emissions and evaluate the out-of-sample performance of different models.
