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The invasion of Ukraine and the energy crisis: comparative advantages in equity valuations

Author

Listed:
  • Fabrizio Ferriani

    (Bank of Italy)

  • Andrea Gazzani

    (Bank of Italy)

Abstract

We study the impact of the widening energy price differentials caused by the war in Ukraine on the returns of European and US firms. Using several measures of firms' exposure to energy consumption, we show that return differentials between EU and US firms widened significantly after the outbreak of the war in Ukraine. Our results indicate a persistent comparative disadvantage between the two regions, driven by heterogeneous energy costs, which has continued even after the partial subsiding of the energy shock by the end of 2022. These findings suggest that the impact of the war on energy prices may have lasting economic implications for Europe, potentially exacerbating its competitiveness disadvantages compared with other geographic regions that have access to more affordable energy inputs.

Suggested Citation

  • Fabrizio Ferriani & Andrea Gazzani, 2023. "The invasion of Ukraine and the energy crisis: comparative advantages in equity valuations," Questioni di Economia e Finanza (Occasional Papers) 789, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_789_23
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    More about this item

    Keywords

    war in Ukraine; energy impacts; energy comparative advantage; financial performance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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