Research

Work in Progress

Man Eats Forest: Impacts of Cattle Ranching on Amazon Deforestation with Nikolas Kuschnig. Slides (pdf), WP coming soon

Abstract

Vast areas of the Brazilian Amazon are converted to pasture, threatening the global climate and the country's agricultural productivity. Yet, the deforestation impact of cattle production itself remains contested, as cattle and pasture serve as the main intermediary for land appropriation. %, and its role is overshadowed by agricultural products. In this paper, we quantify the impact of the expanding cattle herds on deforestation, exploiting information on pre-existing production patterns and international consumption changes for causal identification. We show that the expansion of cattle herds is a major and immediate driver of deforestation. This effect far exceeds deforestation for speculative land appropriation that is not related to beef production. We do find that intensification and improved land tenure could help decrease land pressure marginally, but they cannot offset the land use requirements of beef production. Our findings highlight an urgent need to evaluate the policy implications of beef production and consumption to address their deforestation impacts.


Mapping Mining Areas in the Tropics from 2016–2024 with Philipp Sepin and Nikolas Kuschnig. Under Review. WP (pdf)

Abstract

Mining provides crucial materials for the global economy and the climate transition, but has potentially severe adverse environmental and social impacts. Currently, the analysis of such impacts is obstructed by the poor availability of data on mining activity — particularly in regions most affected. In this paper, we present a novel panel dataset of mining areas in the tropical belt from 2016 to 2024. We use a transformer-based segmentation model, trained on an extensive dataset of mining polygons from the literature, to automatically delineate mining areas in satellite imagery over time. The resulting dataset features improved accuracy and reduced noise from human errors, and can readily be extended to cover new locations and points in time as they become available. Our comprehensive dataset of mining areas can be used to assess local environmental, social, and economic impacts of mining activity in regions where conventional data is not available or incomplete.


Mines–Rivers–Yields: Downstream Mining Impacts on Agriculture in Africa with Gustav Pirich, Maximilian Heinze and Nikolas Kuschnig. Under Review. DOI, WP (pdf)

Abstract

Minerals are essential to fuel the green transition, can foster local employment and facilitate economic development. But their extraction is also linked to several negative social and environmental externalities. Our understanding of these adverse impacts is especially limited in low-income countries, undermining our ability to manage them. In this paper, we use remotely sensed data to shine a light on the impacts of mine runoffs on agricultural yields in Africa. We use a discontinuity from mine locations along river basins to identify the causal effect that is mediated by water. Both agricultural yields and vegetation health in general are reduced considerably downstream of mines. Effects are economically significant and dissipate after about 100 kilometers, suggesting sediment as a possible cause. Our findings underscore an urgent need to better address polluting industries in a development context to limit their negative externalities for agriculture.


The Saturated Bayesian: A Probabilistic Break Detection Framework with Lucas D Konrad and Jesús Crespo Cuaresma

Abstract

Effectively tackling contemporary challenges posed by climate change and the continued degradation of natural habitats requires swift and decisive actions. Identifying the most effective policies (or a mix thereof) is crucial to inform policy-makers that are often constrained in their choice set. Traditional methods for policy evaluation rely on precise knowledge about the occurrence and timing of interventions. Structural break identification on the other hand has a long tradition in the field of econometrics. Recent approaches cast the search for such breaks in the form of indicator-saturated regressions, identifying step-shifts in relevant time series, but lack a proper framework of uncertainty quantification. We introduce a coherent probabilistic framework for the detection of structural breaks with unknown timing in panel data. The proposed Bayesian setup naturally incorporates the quantification of break uncertainty with little overhead. Simulation studies demonstrate that our approach is competitive to existing approaches in detecting true positives and drastically reduces false positives. We apply our method to replicate studies on the effectiveness of climate policies in the European transport sector and provide novel insights in the dynamics of deforestation in the tropics.


The heterogeneous e ffects of macroprudential policies in Central, Eastern, and Southeastern Europe (master thesis), R&R at Economic Modelling. WP (pdf)

Abstract

The effects of macroprudential policy (MPP) are of great interest to policy-makers, given their goal to maintain financial stability and safeguarding the broader macroeconomic environment. Structural characteristics of countries likely mediate these effects, but there is a lack of empirical evidence about the heterogeneous effects of MPPs. We study the dynamic responses to a tightening macroprudential shock for countries in Central, Eastern, and Southeastern Europe (CESEE), a region that experienced periods of pronounced macrofinancial boom-bust cycles and adopted MPPs comparatively early. We employ a hierarchical Bayesian panel vector autoregressive model to allow for joint analysis of multiple economies while explicitly acknowledging heterogeneities across them. We find that MPPs are effective in curbing credit growth and reduced capital inflows in CESEE. However, responses differ considerably across countries, especially for cross-border capital flows. We investigate the impact of structural characteristics and find that the exchange rate regime, the level of financial development, and the external openness of countries play key roles in shaping the effects of MPPs.

Journal Publications

A unified modelling framework for projecting sectoral greenhouse gas emissions. Vashold, L., and Crespo Cuaresma, J. (2024). Communications Earth & Environment, 5(139). DOI

Abstract

Effectively tackling climate change requires sound knowledge about greenhouse gas emissions and their sources. Currently, there is a lack of comprehensive, sectorally disaggregated, yet comparable projections for greenhouse gas emissions. Here, we project sectoral emissions until 2050 under a business-as-usual scenario for a global sample of countries and five main sectors, using a unified framework and Bayesian methods. We show that, without concerted policy efforts, global emissions increase strongly, and highlight a number of important differences across countries and sectors. Increases in emerging economies are driven by strong output and population growth, with emissions related to the energy sector accounting for most of the projected change. Advanced economies are expected to reduce emissions over the coming decades, although transport emissions often still show upward trends. We compare our results to emission projections published by selected national authorities as well as results from Integrated Assessment Models and highlight some important discrepancies.


Eroding Resilience of Deforestation Interventions — Evidence from Brazil’s Lost Decade. Kuschnig, N., Vashold, L., Soterroni, A., and Obersteiner, M. (2023). Environmental Research Letters, 18(7):074039. DOI

Abstract

Brazil once set the example for curtailing deforestation with command and control policies, but, in the last decade, these interventions have gone astray. Environmental research and policy today are largely informed by the earlier successes of deforestation interventions, but not their recent failures. Here, we investigate the resilience of deforestation interventions. We discuss how the recent trend reversal in Brazil came to be, and what its implications for the design of future policies are. We use newly compiled information on environmental fines in an econometric model to show that the enforcement of environmental policy has become ineffective in recent years. Our results add empirical evidence to earlier studies documenting the erosion of the institutions responsible for forest protection, and highlight the considerable deforestation impacts of this erosion. Future efforts for sustainable forest protection should be aimed at strengthening institutions, spreading responsibilities, and redistributing the common value of forests via incentive-based systems.


BVAR: Bayesian vector autoregressions with hierarchical prior selection in R. Kuschnig, N., and Vashold, L. (2021). Journal of Statistical Software, 100(14). DOI, R package

Abstract

Vector autoregression (VAR) models are widely used for multivariate time series analysis in macroeconomics, finance, and related fields. Bayesian methods are often employed to deal with their dense parameterization, imposing structure on model coefficients via prior information. The optimal choice of the degree of informativeness implied by these priors is subject of much debate and can be approached via hierarchical modeling. This paper introduces BVAR, an R package dedicated to the estimation of Bayesian VAR models with hierarchical prior selection. It implements functionalities and options that permit addressing a wide range of research problems, while retaining an easy-to-use and transparent interface. Features include structural analysis of impulse responses, forecasts, the most commonly used conjugate priors, as well as a framework for defining custom dummy-observation priors. BVAR makes Bayesian VAR models user-friendly and provides an accessible reference implementation.


The impact of macroprudential policies on capital flows in CESEE. Eller, M., Hauzenberger, N., Huber, F., Schuberth, H., and Vashold, L. (2021). Journal of International Money and Finance, 119:102495. DOI, WP (pdf)

Abstract

In line with recent policy discussions on the use of macroprudential policies (MPPs) to respond to cross-border risks arising from capital flows, this paper tries to quantify which impact MPPs had on capital flows in Central, Eastern and Southeastern Europe (CESEE). This region experienced a substantial boom-bust cycle in capital flows amid the global financial crisis and policymakers had been quite active in adopting MPPs already before that crisis. To study the dynamic responses of capital flows to a tightening in the macroprudential environment, we propose a novel regime-switching factor-augmented vector autoregressive (FAVAR) model and include an intensity-adjusted macroprudential policy index to identify MPP shocks. Our results suggest that tighter MPPs translate into negative dynamic reactions of domestic private sector credit growth and gross capital inflow volumes in a majority of the countries analyzed. Level and volatility responses of capital inflows are often correlated positively, suggesting that if MPPs were successful in reducing capital inflows, they would also contribute to lower capital flow volatility. We also provide evidence that the effects of MPP tightening are in most cases stronger in an environment characterized by low interest rates, suggesting that MPPs would be more effective if conventional monetary policy were facing constraints.

Other Publications

The Economic Impacts of Malaria: Past, Present, Future. Kuschnig, N. and Vashold, L. (2023). In: Planetary Health Approaches to Understand and Control Vector-borne Diseases, Wageningen Academic. DOI, WP (pdf)

Blue Skies, Blue Seas: Air pollution, marine plastics, and coastal erosion in the Middle East and North Africa. Heger, M., Vashold, L., Palacios, A., Alahmadi, M., Bromhead, M.A., Acerbi, M. (2022). MENA Development Report, The World Bank Group. DOI

CESEE’s macroprudential policy response in the wake of the COVID-19 crisis. Eller, M., Martin, R., and Vashold, L. (2021). Focus on European Economic Integration, Oesterreichische Nationalbank. Paper (pdf)

Macroprudential policies in CESEE - an intensity-adjusted approach. Eller, M., Martin, R., Schuberth, H., and Vashold, L. (2020). Focus on European Economic Integration, Oesterreichische Nationalbank. Paper (pdf)

Did macroprudential policies play a role in stabilizing the credit and capital flow cycle in CESEE? Eller, M. and Schuberth, H. (2020). In: 30 Years of Transition in Europe, Edward Elgar. DOI