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Nonlinear effects of climate policy uncertainty and financial speculation on the global prices of oil and gas

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  • Guo, Jiaqi
  • Long, Shaobo
  • Luo, Weijie

Abstract

With the acceleration of global energy transition and financialization, intense climate policy uncertainty and financial speculation have significant impacts on the global energy market. This paper uses TVP-VAR-SV models to analyze the nonlinear effects of climate policy uncertainty (CPU), financial speculation, economic activity, and US dollar exchange rate on global prices of crude oil and natural gas respectively, and then compare the time-varying response of oil prices and gas prices to six representative CPU peaks. The results show that responses of energy prices to various shocks have significant nonlinear effects: the time-varying effect of CPU on energy prices from positive to negative over time is significant, and financial speculation has the opposite effects on oil and gas prices. The effect from economic activity is mainly positive, while the effects of US dollar exchange are negative and stable. These results provide important implications for policymakers and investors dealing with high levels of climate policy uncertainty, financial speculation, and global economic activity.

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  • Guo, Jiaqi & Long, Shaobo & Luo, Weijie, 2022. "Nonlinear effects of climate policy uncertainty and financial speculation on the global prices of oil and gas," International Review of Financial Analysis, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002423
    DOI: 10.1016/j.irfa.2022.102286
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    More about this item

    Keywords

    Climate policy uncertainty; Financial speculation; Economic activity; Crude oil prices; Natural gas prices;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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