Fractional Integration v Structural Change: Testing the Convergence of CO₂ Emissions

Abstract

This paper assesses the stochastic convergence of relative CO₂ emissions within three different sets of countries over the period 1950-2013. Using the Local Whittle (LW) estimator and its variants we investigate whether relative per-capita CO₂ emissions are long memory processes which, although highly persistent, may revert to their mean/trend in the long run thereby indicating evidence of stochastic convergence. Furthermore, we test whether (possibly) slow convergence or the complete lack of it, may be the result of structural changes to the deterministics of each of the relative percapita CO₂ emissions series by means of the tests of Berkes et al. (2006) and Mayoral (2012). Our results show relatively weak support for stochastic convergence of CO₂ emissions among the three groups, indicating that only between 30% and 40% of the countries converge to each group-average in a stochastic sense. Our results also point toward the absence of structural changes.

Keywords: Fractional Integration, Local Whittle Estimation, Structural Change

JEL Classification: C22, Q54, Q56