
EUAs and CERs : Interactions in a Markov regime-switching environment
Chevallier, Julien (2012), EUAs and CERs : Interactions in a Markov regime-switching environment, Economics Bulletin, 32, 1, p. 86-101
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Article accepté pour publication ou publiéDate
2012Journal name
Economics BulletinVolume
32Number
1Publisher
Economics Bulletin
Pages
86-101
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Chevallier, JulienAbstract (EN)
This paper analyzes jointly the time series of European Union Allowances (EUAs) and Certified Emissions Reductions (CERs) in a Markov regime-switching environment. The purpose consists in capturing the interactions between the two time series - which have been highlighted in previous literature - with respect to the underlying business cycle. Given the recent period of economic growth and financial crisis, regime switching models appear indeed interesting to shed new light on the data. The main result of the paper features a switch from a low-growth period to a high-growth period in July 2009, in a context of timid economic recovery. Besides, the Markov regime-switching model reveals that significant interactions exist between EUAs (during expansions and recessions) and CERs (mostly during expansions). Colletively, these results could be of use to regulatory authorities, academics and financial agents (investment bankers, analysts, asset managers).Subjects / Keywords
EUA; CER; Markov regime-switchingRelated items
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