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Global Evidence of Oil Supply Shocks and Climate Risk a GARCH-MIDAS Approach

Author

Listed:
  • Taofeek O. AYINDE
  • Farouq A. ADEYEMI

    (Department of Economics, Fountain University)

Abstract

The study examines the global evidence of oil supply shocks and climate risks. Using the GARCH-MIDAS regression and a dataset spanning the period 2000 – 2018, we find that oil supply shocks are a better predictor of climate risks than the inherent environmental factors. The evidence indicates that oil supply shocks dampen climate risk challenges through the reservation and conservation channels. To reduce oil supply shocks, the study recommends the deployment of moral suasions in oil resource-rich countries.

Suggested Citation

  • Taofeek O. AYINDE & Farouq A. ADEYEMI, 2023. "Global Evidence of Oil Supply Shocks and Climate Risk a GARCH-MIDAS Approach," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 4(2), pages 1-7.
    • Handle: RePEc:ayb:jrnerl:78
    DOI: 2023/06/13
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    References listed on IDEAS

    as
    1. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    2. Christiane Baumeister & James D. Hamilton, 2019. "Structural Interpretation of Vector Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand Shocks," American Economic Review, American Economic Association, vol. 109(5), pages 1873-1910, May.
    3. Guo, Jiaqi & Long, Shaobo & Luo, Weijie, 2022. "Nonlinear effects of climate policy uncertainty and financial speculation on the global prices of oil and gas," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Rapach, David & Zhou, Guofu, 2013. "Forecasting Stock Returns," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 328-383, Elsevier.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Oil supply shocks; Global warming; Climate risk; GARCH-MIDAS; Predictability; Forecast evaluation;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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