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How do energy price shocks affect global economic stability? Reflection on geopolitical conflicts

Author

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  • Zhao, Jun
  • Wang, Bo
  • Dong, Kangyin
  • Shahbaz, Muhammad
  • Ni, Guohua

Abstract

The sharp rise of energy prices after the Russia-Ukraine conflict have restricted social activities and economic evolution in the area, and further brought the underlying macroeconomic effects of energy price fluctuations into public view. To examine whether and how the global energy price volatility affects the stable operation of the national economy, we perform econometric analysis on global 69 economies from 2003 to 2019. The regression outcomes insist that: (1) the price volatility of three kinds of energy has a substantial restraint impact on economic growth behaviors, among which the natural gas price has the most prominent effect; (2) the impacts of frequent energy prices shocks on economic stability significantly vary among different economic organizations, which are more pronounced for the sub-samples of non-B&RI, OECD, and RCEP countries; (3) the fluctuation of three energy prices is a vital factor affecting economic growth at any quantile level, and its impact on economic growth is most prominent in the high quantile range; and (4) industrial upgrading plays an intermediary role in the energy price-economic stability nexus; in other words, industrial upgrading is regarded as a plausible channel that links energy prices with economic stability. Hence, some policy implications on adjusting energy price mechanism and strengthen economic stability are provided.

Suggested Citation

  • Zhao, Jun & Wang, Bo & Dong, Kangyin & Shahbaz, Muhammad & Ni, Guohua, 2023. "How do energy price shocks affect global economic stability? Reflection on geopolitical conflicts," Energy Economics, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323005121
    DOI: 10.1016/j.eneco.2023.107014
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    Keywords

    Energy shocks; Economic stability; Russo-Ukrainian war; Heterogeneous analysis; Mechanism analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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