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Forecasting Long-Run Coal Price in China: A Shifting Trend Time-Series Approach

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  • Baomin Dong
  • Xuefeng Li
  • Boqiang Lin

Abstract

The paper studies the behavior of mid- to long-run real coal price in the Chinese market. The problem is of great importance because the coal takes a 70% share in China's energy mix, and China is the world's second largest carbon emitter. An accurate forecast in coal price is crucial in predicting China's future energy consumption mix as well as the private sector's energy-type-related investment decisions. In estimation and forecasting, the shifting trend time-series model suggested by Robert Pindyck is used to capture the technological progress that is unobservable to the econometrician. It is found that the shifting trend model with continuous and random changes in price level and trend outperforms plain vanilla ARIMA models. It is argued that the model postulated by Pindyck is robust even in a transition economy where energy prices are subject to relatively rigid regulatory control. Out-of-sample forecasts are provided. Copyright (C) 2010 Blackwell Publishing Ltd.

Suggested Citation

  • Baomin Dong & Xuefeng Li & Boqiang Lin, 2010. "Forecasting Long-Run Coal Price in China: A Shifting Trend Time-Series Approach," Review of Development Economics, Wiley Blackwell, vol. 14(s1), pages 499-519, August.
  • Handle: RePEc:bla:rdevec:v:14:y:2010:i:s1:p:499-519
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    Cited by:

    1. Zhou, Wenji & Zhu, Bing & Chen, Dingjiang & Zhao, Fangxian & Fei, Weiyang, 2014. "How policy choice affects investment in low-carbon technology: The case of CO2 capture in indirect coal liquefaction in China," Energy, Elsevier, vol. 73(C), pages 670-679.
    2. Maria Jesus Herrerias and Eric Girardin, 2013. "Seasonal Patterns of Energy in China," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).

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