Measuring Cross-Correlations, Contagion and Long-Range Behavior between Fires in Brazil and Some Time Series Related to Its Economic Growth

Abstract

Fires bring up the debate about their impact on Brazil’s economic growth. Some processing tools such as cointegration and, especially, the correlation have been applied for identifying possible transmission or contagion mechanisms between distinct time series. This paper adopts the detrended cross-correlation analysis (DCCA) and rolling window approach to investigate the dynamic coupling between fires and the evolution of some key variables related to Brazil’s economic growth (e.g., agricultural planted area, ethanol production, rainfall in the midwest region and gross domestic product) covering two periods, namely from January 2012 to August 2016 (before the Brazilian presidential impeachment occurred in 2016) and from September 2016 to April 2021, covering the post-impeachment scenario, with the new government policies in the environmental sector. The results show a positive cross-correlation between the level of fires versus planted area of all cereals, leguminous and oleaginous in Brazil (mostly Soybean and Corn) and versus ethanol production (a renewable energy generation). It is also possible to verify some impact level on the Brazilian gross domestic product. Furthermore, we observed quantitatively, by means of the adopted methods that fires in Brazil have the potential to damage economic growth and some activities addressed in this study can also harm the environment in both mid and long-term.

Keywords

• time series
• DCCA method
• commodities
• rolling window