Here are a couple of slides showing the relationship between CO2 and annual temperature anomalies from 1980 thru 2022 conditioned by the type of year (viz., el Nino, la Nina or neutral) as defined by NOAA. I used an ANCOVA analysis in the "R" package "HH". The first slide shows the summary results. The key takeaway is that the relationship is statistically significant (F-test). The second slide graphs temperature anomalies and CO2 levels with the type of year set as a "factor" in the ANCOVA analysis. The key takeaway is that the slopes showing the underlying rise in temperature anomalies as CO2 levels rise are consistent. What does change are the intercepts. El Nino years see a jump in the intercept while la Nina years see a drop in the intercept relative to the neutral years. In other words, the type of year (whether it's an el Nino or la Nina or neutral year) shifts the temperature anomaly up or down, but does not affect the slope. The underlying slope of the temperature rise is a function of CO2 levels.
Missionary Work Among Savages
Sunday, February 18, 2024
Saturday, July 15, 2023
Another hot July, so it's time for another post on climate change. We've all heard how el Nino and la Nina events affect temperature data in any given year, but we rarely see those events included in any kind of time series. Usually it's just a linear time trend or some kind of smoothed trend. So let's take a look at how those events have influenced annual temperatures per NOAA data. I selected annual temperature data from 1980 thru 2022 along with NOAA's assessment as to whether each corresponding year was an el Nino year, a la Nina year or a neutral year. The model is an ARMAX(1,0) type with three exogenous variables. The dependent variable is temperature anomaly (in Celsius). Along with a constant (which captures a "neutral" year) I've included a dummy variable for el Nino, a dummy variable for la Nina and a linear time trend. Without further ado, here are the results:
Monday, July 18, 2022
Graphs showing relationship between CO2 and temperature anomalies (HADCRU5) using annual data from 1959 thru 2021.
Basic OLS output:
Thursday, December 3, 2020
This post takes an historical look at the difference between the unemployment rate as calculated using the civilian labor force at the peak of the business cycle and the headline unemployment rate. If the economy was in a recession (NBER dates), then I calculated the unemployment rate as:
1 - (employment / civilian labor force at the last peak)
As a general rule going back to 1948, the difference between the above calculation and the headline unemployment rate tended to be negative, although there were a couple of short-lived minor recessions where this pattern did not occur. In the figure below the green rectangles indicate NBER recessions (USRECM) and the orange/brown line (diffurate) indicates the difference between the calculation shown above and the headline unemployment rate. Obviously the brown line shows no difference (beyond rounding, hence the squiggles) when the economy is not in recession.
It's obvious from this figure that something is radically different in the relationship between the unemployment rate and the civilian labor force. Even when the economy suffered large employment shocks, as happened during the 1970s, the pattern showed a negative difference between the unemployment rate calculated using the cyclical peak civilian labor force and the headline unemployment rate. This is the only major recession in which that pattern does not hold. Why?
Saturday, November 23, 2019
Tuesday, May 8, 2018
Did Reagan's "Supply Side" Tax Cuts Perform as Advertised?
In attempting to answer this question we have to ask what distinguishes a "supply side" growth approach from a garden variety business cycle macro approach to managing aggregate demand (AD)? Notice that you cannot answer this question simply by noting that Reagan's tax cuts are associated with an increase in the GDP growth rate. Why? Several reasons, but one among many is that tax cuts don't just operate on the supply side; they also stimulate AD, so this presents an identification problem. What we observe with actual GDP is best thought of as the equilibrium point where AD and aggregate supply (AS) intersect. In the econometric literature this is called "simultaneous equations bias." This is a serious but not insurmountable problem. It's also one that I'm not going to discuss further because I want to move things along. For now just note that "simultaneous equations bias" is one of many problems a researcher is likely to come across if that researcher is only looking at observed GDP.
There are a lot of cartoon versions of what supply side economics is supposed to accomplish. One of the more famous (or infamous) of these cartoon versions is the familiar one that non-technical readers would find on the op-ed pages of the Wall Street Journal. But there was a more serious set of claims and predictions made by serious economists (i.e., economists not named Art Laffer). There were three major claims, all of which are testable. The first claim is that cutting the top marginal tax rate would encourage greater labor effort. Leisure is a normal good, so people demand more leisure as incomes go up. But with tax cuts the cost of leisure also goes up because workers are giving up a greater increment in after tax earnings with each additional hour of leisure. This second effect is called the substitution effect. Proponents of the Reagan supply side tax cuts argued that the substitution effect would dominate the income effect, and this would lead to an increase in labor effort. This would predict an increase in average hours worked. But when we look at the FRED data we find that average hours worked do not appear to have increased at all. In fact, there has been a steady decline going back for decades.