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The Impact of Energy Market Uncertainty Shocks on Energy Transition in Europe

Mehmet Balcilar, David Roubaud, and Muhammad Shahbaz

Year: 2019
Volume: Volume 40
Number: The New Era of Energy Transition
DOI: 10.5547/01956574.40.SI1.mbal
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Abstract:
We study effects of energy market uncertainty shocks on energy transition on the 28 European Union countries from 1990 to 2015 using annual frequency data. We assess the effects of oil price as well as the energy market supply, demand, and residual price shocks using a time-varying parameter panel data stochastic volatility model. We show the importance of reducing energy market uncertainty for the success of a clean energy transition in Europe as uncertainties have strong time-varying effects on the transition from fossil fuels to renewable energy. The oil price and residual energy price uncertainties are the key factors encouraging renewable energy transition that reduces the vulnerability of economies to energy shocks. Energy supply shocks affect the transition negatively while the demand shocks work similarly to residual energy prices shocks, requiring a robust energy base that is less volatile. The paper also discusses policy recommendations.



On the Oil Price Uncertainty

Zied Ftiti and Fredj Jawadi

Year: 2019
Volume: Volume 40
Number: Special Issue
DOI: 10.5547/01956574.40.SI2.zfti
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Abstract:
This study focuses on oil price volatility and uncertainty over the period January 1986-December 2018, covering episodes of oil price increases and collapses. Accordingly, in line with Poon and Granger (2003), and Terasvirta and Zhao (2011), we propose three different specifications of stochastic oil volatility: standard stochastic volatility, stochastic volatility moving average, leverage stochastic volatility models. We compute the out-of-sample forecasts for the uncertainty in oil prices using the estimates for these three stochastic oil price volatility models and we discuss its effects. Our findings show that the standard stochastic volatility model outperforms the other two models when focusing on oil price uncertainty. This finding is relevant to better forecast and understand the effects of oil price uncertainty on the real economy.





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