Essays on Applied Time Series Econometrics

Abstract

This dissertation empirically examines how an exogenous shock can impact on macroeconomy, with a particular focus on the impact of the climate change on the United States macroeconomy and the impact of the global oil price shock to South Korean macroeconomy using applied time series econometrics models. In Chapter 1, the changing effects of the climate change on the US macroeconomy has been studied with a Bayesian Time-Varying Parameter with Stochastic Volatility model framework. Using Actuaries Climate Index (ACI) and monthly inflation, industrial production and unemployment from July 1975 to February 2024, it captures how the transmission of climate disturbances shift over time. Importantly this research identifies the timing of the structural break in the ACI data and show the importance of the structural break in estimation of parameters with time variation. This approach reveals that both the volatility and the acceleration of the climate change have been intensified over time, amplifying the macroeconomic consequences. Chapter 2 extends the research about the impacts of climate change on the US macroeconomy by implementing a Factor Augmented VAR (FAVAR) model to present h ow the climate change shock represented by the ACI data could impact on a large set of 123 monthly US macroeconomic variables from the Federal Reserve Economic Data. The richness of the macroeconomic dataset allows to show the impact of climate change shock on all sectors of entangled US macroeconomic variables. This research shows that there exist significant impacts of the climate change shock on: the working hours in goods-producing and manufacturing sectors in the US labor market, housing starts and permits in national level, real M2 money stock, S&P500 in US stock market, treasury and corporate spreads, and the inflation in medical care sector. These results can be used as an alternative measure for the variable selection method that conveys richer economic stories about which of macroeconomic variables and the sectors are more prone to climate change. Chapter 3 implements the Time-Varying Parameter model to study the changing impacts of the global oil price change on South Korean macroeconomy. This research complements the existing literature by showing empirical evidence about the demand-driven oil price shock could boost economic growth as the exporting countries in Asia could benefit more from the rise in global real economic activities. This research subsequently finds the shift in the initial response of the Korean industrial output from the global oil price change shock, presenting a change in contemporaneous response of Korean industry from the global oil shocks that is turning negative since 2014 although the following responses in later period is still positive, serving as an alarm call for South Korean industry.