Recent years have seen an expansion of carbon markets around the world as various policymakers attempt to reduce CO2 emissions. This paper considers two of the major types of carbon permits: European Union Allowances (EUAs, arising from the European Union Emissions Trading Scheme, EU ETS) and...

We use factor augmented vector autoregressive models with time-varying coefficients to construct a financial conditions index. The time-variation in the parameters allows for the weights attached to each financial variable in the index to evolve over time. Furthermore, we develop methods for...

In an effort to meet its obligations under the Kyoto Protocol, in 2005 the European Union introduced a cap-and-trade scheme where mandated installations are allocated permits to emit CO2. Financial markets have developed that allow companies to trade these carbon permits. For the EU to achieve...

This paper considers how an investor in foreign exchange markets might exploit predictive information in macroeconomic fundamentals by allowing for switching between multivariate time series regression models. These models are chosen to reflect a wide array of established empirical and...

This paper considers how an investor in the foreign exchange market can exploit predictive information by means of flexible Bayesian inference. Using a variety of different vector autoregressive models, the investor is able, each period, to revise past predictive mistakes and learn about...

In this paper, we make use of state space models toinvestigate the presence of stochastic trends in economic time series. Amodel is specified where such a trend can enter either in the autoregressiverepresentation or in a separate state equation. Tests based on the formerare analogous to...

In this paper, we make use of state space models to investigate the presence of stochastic trends in economic time series. A model is specified where such a trend can enter either in the autoregressive representation or in a separate state equation. Tests based on the former are analogous to...