Oil and gas market in the UK: evidence from a cointegration approach
AbstractThe paper examines the relationship between UK wholesale gas prices and the Brent oil price over the period 1996-2003. Tests for Unit Roots and Cointegration are carried out and it is discovered that a long run equilibrium relationship between UK gas and oil prices predates the opening of the UK-Mainland Europe Inter-connector. Following a recursive methodology (Hansen & Johansen 1999), it was found that the cointegrating relationship is present throughout the sample period. However, the long run solutions seem to be more volatile. Evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas.
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Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2004_18.
Date of creation: Nov 2004
Date of revision: Nov 2004
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More information through EDIRC
oil; gas; cointegration; nonparametric cointegration; recursive trace test; error correction; impulse response;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
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