Analyzing the dynamics of the persistence of energy-related uncertainty of G7 countries: What does the time-varying SUR-ADF model say?

The present study analyzed the persistent degree of energy market uncertainty by employing the new energy-related uncertainty index (EUI) of Dang et al. (2023) for the G7 countries over the 2000M07-2022M09. We developed a novel time-varying SUR-ADF model to measure the half-life of shocks to the index. Our findings reveal the half-life of the EUI varied over time and across countries. In addition, our results reveal that the half-life of the EUI of all countries increased following the 2007–2008 financial crisis and the COVID-19 pandemic. Finally, our findings indicate that the EUI of the US, Japan, Italy, and Germany have behaved as unit root processes over the recent years, while the EUI of Canada, France, and the UK have revealed stationary processes. According to the findings, the G7 countries must implement anti-energy market uncertainty policies with various horizons. In the countries in which the EUI displays unit root behavior, the policymakers and authorities of the energy system have to consider the policies with long horizons to mitigate the adverse effects of increasing the energy market uncertainty. In contrast, the policymakers of Canada, France, and the UK can control the uncertainties of the energy market by implementing short-horizon policies.