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Oil Shocks and the Macroeconomy: The Role of Price Variability

Kiseok Lee, Shawn Ni, and Ronald A. Ratti

Year: 1995
Volume: Volume16
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No4-2
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Abstract:
In this paper we argue that an oil price change is likely to have greater impact on real GNP in an environment where oil prices have been stable, than in an environment where oil price movement has been frequent and erratic. An oil price shock variable reflecting both the unanticipated component and the time-varying conditional variance of oil price change (forecasts) is constructed and found to be highly significant in explaining economic growth across different sample periods, even when matched against various economic variables and other functions of oil price. We find that positive normalized shocks have a powerful effect on growth while negative normalized shocks do not.



Chaos in Natural Gas Futures?

Victor Chwee

Year: 1998
Volume: Volume19
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-10
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Abstract:
Technical analysis using charting techniques to forecast future price trends can be difficult due to the volatile and unpredictable nature of futures market. Alternatively, the emergence of chaos theory seeks to find order in random looking futures price behavior. Hence, this paper tests for the presence of nonlinearity and chaos using the NYMEX 1 -month, 2-month, 3-month, and 6-month daily natural gas settlement prices, from April 1990 to September 1996. In doing so, we use the BDS statistic of Brock, Dechert, and Scheinkman (1987) for nonlinearity testing and then proceed to compute the Lyapunov spectra to determine to what degree futures data resemble a chaotic system. Although the results indicate the presence of nonlinearity, they fail to provide significant evidence of deterministic chaos.



Reducing the Impacts of Energy Price Volatility Through Dynamic Portfolio Selection

H. Brett Humphreys and Katherine T. McClain

Year: 1998
Volume: Volume19
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No3-6
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Abstract:
This paper uses financial portfolio theory to demonstrate how the energy mix consumed in the United States could be chosen given a national goal to reduce the risky to the domestic macroeconomy of unanticipated energy price shocks. An efficient portfolio frontier of U.S. energy consumption is constructed using time-varying variances and covariances estimated with generalized autoregressive conditional heteroskedastic models. The set of efficient portfolios developed are intended to minimize the impact of price shocks, but are not the least cost energy consumption bundles. The results indicate that while the electric utility industry is operating close to the minimum variance position, a shift towards coal consumption would reduce price volatility for overall U.S. energy consumption. With the inclusion of potential externality costs, the shift remains away from oil but towards natural gas instead of coal.



The North American Natural Gas Liquids Markets are Chaotic

Apostolos Serletis and Periklis Gogas

Year: 1999
Volume: Volume20
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No1-5
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Abstract:
In this paper we test for deterministic chaos (i.e., nonlinear deterministic processes which look random) in seven Mont Belview, Texas, hydrocarbon markets, using monthly data from 1985:1 to 1996:12--the markets are those of ethane, propane, normal butane, iso-butane, naptha, crude oil, and natural gas. In doing so, we use the Lyapunov exponent estimator of Nychka, Ellner, Gallant, and McCaffrey (1992). We conclude that there is evidence, consistent with a chaotic nonlinear generation process in all five natural gas liquids markets.



EnronOnline and Informational Efficiency in the U.S. Natural Gas Market

Donald Murry and Zhen Zhu

Year: 2004
Volume: Volume 25
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No2-3
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Abstract:
We investigate the impact of the introduction and exit of EnronOnline on the efficiency of the U.S. natural gas market. In particular, we examine the natural gas market informational efficiencies by investigating the time-series properties of natural gas prices: changes in natural gas price long-term dependency, comovement of the spot and futures prices, and changes in volatility patterns in the futures prices and spot prices at representative trading hubs. We find evidence that the introduction and demise of EOL coincided with the improvement and worsening in the degree of the market informational efficiency.



Systematic Features of High-Frequency Volatility in Australian Electricity Markets: Intraday Patterns, Information Arrival and Calendar Effects

Helen Higgs and Andrew C. Worthington

Year: 2005
Volume: Volume 26
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No4-2
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Abstract:
This paper investigates the intraday price volatility process in four Australian wholesale electricity markets; namely New South Wales, Queensland, South Australia and Victoria. The data set consists of half-hourly electricity prices and demand volumes over the period January 1, 2002 to June 1, 2003. A range of processes including GARCH, RiskMetrics, normal Asymmetric Power ARCH or APARCH, Student APARCH and skewed Student APARCH are used to model the time-varying variance in prices and the inclusion of news arrival as proxied by the contemporaneous volume of demand, time-of-day, day-of-week and month-of-year effects as exogenous explanatory variables. The skewed Student APARCH model, which takes account of right skewed and fat tailed characteristics, produces the best results in all four markets. The results indicate significant innovation (ARCH effects) and volatility (GARCH effects) spillovers in the conditional standard deviation equation, even with market and calendar effects included. Intraday prices also exhibit significant asymmetric responses of volatility to the flow of information.



Does Oil Price Uncertainty Affect Energy Use?

Gerard H. Kuper and Daan P. van Soest

Year: 2006
Volume: Volume 27
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No1-4
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Abstract:
Theory predicts that the presence of fixed costs implies that the relationship between energy use and energy price changes is asymmetric, as the firm�s output and investment decisions respond differently to energy price increases and decreases. The asymmetry is exacerbated if future energy prices are uncertain, but to date the empirical literature does not explicitly take uncertainty into account. The contribution of this paper is twofold. First, we develop a new measure of energy price uncertainty. Second, we apply this measure to explain energy use in fifteen OECD countries between 1978 and 1996. Our results support the theoretical prediction that energy price uncertainty affects the asymmetry and renders energy saving technologies less attractive.



Electricity Price Volatility and the Marginal Cost of Congestion: An Empirical Study of Peak Hours on the NYISO Market, 2001-2004

Lester Hadsell and Hany A. Shawky

Year: 2006
Volume: Volume 27
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No2-9
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Abstract:
We examine the volatility characteristics of the NYISO Day Ahead and Real Time electricity markets for peak hours from January 2001 to June 2004. GARCH models are used to study the differences in volatility across zones. We find that price volatility is higher but less persistent in the Real Time market than in the Day Ahead market. Furthermore, we document the importance of transmission congestion and empirically estimate its impact on volatility in electricity prices. We also examine the Day Ahead premium and show how it is related to volatility in Real Time prices. The implications for participants in these markets are discussed.



A Note on the Oil Price Trend and GARCH Shocks

Jing Li and Henry Thompson

Year: 2010
Volume: Volume 31
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-8
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Abstract:
This paper investigates the trend in the monthly real price of oil between 1990 and 2008 with a generalized autoregressive conditional heteroskedasticity (GARCH) model. Trend and volatility are estimated jointly with the maximum likelihood estimation. There is long persistence in the variance of oil price shocks, and a GARCH unit root (GUR) test can potentially yield a significant power gain relative to the augmented Dickey-Fuller (ADF) test. After allowing for nonlinearity, the evidence supports a deterministic trend in the price of oil. The deterministic trend implies that influence of a price shock is transitory and policy efforts to restore a predictable price after a shock would be unwarranted in the long run.



Linear and Non-linear Causality between CO2 Emissions and Economic Growth

Marco R. Barassi and Nicola Spagnolo

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.2
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Abstract:
In this paper we investigate the casual effects between per capita economic growth and carbon dioxide emissions. The focus on the causal analysis in both mean and variance differentiate this study from other contributions to the literature. The analysis is conducted for six countries. We find substantial evidence of feedback in the causality in mean and volatility spillovers between emissions and output growth in the six countries under examination Keywords: CO2 Emissions, Growth, Multivariate GARCH, Volatility http://dx.doi.org/10.5547/01956574.33.3.2




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