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Testing for Granger causality in distribution tails: An application to oil markets integration

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  • Candelon, Bertrand
  • Joëts, Marc
  • Tokpavi, Sessi

Abstract

This paper proposes an original procedure which allows for testing of Granger-causality for multiple risk levels across tail distributions, hence extending the procedure proposed by Hong et al. (2009). Asymptotic and finite sample properties of the test are considered. This new Granger-causality framework is applied for a set of regional oil markets series. It helps to tackle two main questions 1) Whether oil markets are more or less integrated during periods of extreme energetic prices movements and 2) Whether price-setter markets change during such periods. Our findings indicate that the integration level between crude oil markets tends to decrease during extreme periods and that price-setter markets also change. Such results have policy implication and stress the importance of an active energetic policy during episode of extreme movements.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 31 (2013)
Issue (Month): C ()
Pages: 276-285

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Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:276-285

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Extreme risk spillovers; Granger-causality in risk; Distribution tails; Value-at-Risk; Crude oil markets integration;

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References

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Cited by:
  1. Marc Joëts, 2013. "Energy price transmissions during extreme movements," Working Papers 2013-028, Department of Research, Ipag Business School.
  2. repec:ipg:wpaper:28 is not listed on IDEAS
  3. Bertrand Caudelon & Sessi Tokpavi, 2014. "A Nonparametric Test for Granger-causality in Distribution with Application to Financial Contagion," EconomiX Working Papers 2014-18, University of Paris West - Nanterre la Défense, EconomiX.

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