Does economic policy uncertainty matter for carbon emission? Evidence from US sector level data
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RESEARCH ARTICLE
Does economic policy uncertainty matter for carbon emission? Evidence from US sector level data Yong Jiang 1 & Zhongbao Zhou 2 & Cenjie Liu 3 Received: 7 August 2018 / Accepted: 29 May 2019 # Springer-Verlag GmbH Germany, part of Springer Nature 2019
Abstract Economic policy uncertainty (EPU) will affect the external business environment of economic entities, which in turn affects the decision-making of economic entities. Meanwhile, carbon emissions are closely related to the production decisions of microeconomic entities. Thus, studying the relationship between EPU and carbon emissions helps to clarify the impact of institutional factors behind carbon emissions, which is significant for achieving green development. Based on US sector data, we apply a novel parametric test of Granger causality in quantiles to analyze the relationship between EPU and carbon emissions (its growth and uncertainty). We find that there is an outstanding pattern of Granger-causality from the US EPU to the growth of carbon emissions in the tails of the growth distributions of carbon emissions in the industrial sector, residential sector, electric power sector, and transportation sector, except in the commercial sector. That is, carbon emissions are affected by EPU when the growth of carbon emissions is in a higher or lower growth period. Lastly, we find that the US EPU affects carbon emissions uncertainty over the entire conditional distribution for all sectors. Keywords Economic policy uncertainty . CO2 emissions . Granger causality in quantiles . US sector
Introduction Global warming, which is caused by carbon emissions has been recognized as a threat to public health and welfare. The reduction in carbon emissions is, therefore, a necessary task for each country in order to address the severe challenges arising from global warming. Scholars analyze the influencing factors of carbon emissions greatly. However, previous studies Responsible editor: Philippe Garrigues * Cenjie Liu [email protected] Yong Jiang [email protected] Zhongbao Zhou [email protected] 1
School of Finance, Nanjing Audit University, Yushan West Road, Nanjing 211815, Jiangshu Province, People’s Republic of China
2
Business School, Hunan University, Yuelu South Road, Changsha 410082, Hunan Province, People’s Republic of China
3
Business School, Hunan Agricultural University, Chang Nong Road, Changsha 410128, Hunan Province, People’s Republic of China
have neglected the macroeconomic institutional factor, which closes the link to carbon emissions. As a reflection of macroeconomic institutional factor, EPU certainly affects the external business environment of economic entities, which in turn affects the decision-making of economic entities. Meanwhile, carbon emissions are closely related to the production decisions of microeconomic entities. Therefore, as the world’s second-largest carbon emitter, analyzing the relationship between the US EPU and carbon emissions helps to clarify the impact of institutional factors behind carbon emissions, w
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