Universidad Complutense de Madrid
E-Prints Complutense

Volatility spillovers and causality of carbon emissions, oil and coal spot and futures for the EU and USA

Impacto

Downloads

Downloads per month over past year



Chang, Chia-Lin and McAleer, Michael and Zuo, Guangdong (2017) Volatility spillovers and causality of carbon emissions, oil and coal spot and futures for the EU and USA. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 15, 2017, ] (Unpublished)

[img]
Preview
PDF
Creative Commons Attribution Non-commercial Share Alike.

2MB

URLURL Type
https://www.ucm.es/icaeOrganisation


Abstract

Recent research shows that efforts to limit climate change should focus on reducing emissions of carbon dioxide over other greenhouse gases or air pollutants. Many countries are paying substantial attention to carbon emissions to improve air quality and public health. The largest source of carbon emissions from human activities in some countries in Europe and elsewhere is from burning fossil fuels for electricity, heat, and transportation. The price of fuel influences carbon emissions, but the price of carbon emissions can also influence the price of fuel. Owing to the importance of carbon emissions and their connection to fossil fuels, and the possibility of Granger (1980) causality in spot and futures prices, returns and volatility of carbon emissions, it is not surprising that crude oil and coal have recently become a very important research topic. For the USA, daily spot and futures prices are available for crude oil and coal, but there are no daily spot or futures prices for carbon emissions. For the EU, there are no daily spot prices for coal or carbon emissions, but there are daily futures prices for crude oil, coal and carbon emissions. For this reason, daily prices will be used to analyse Granger causality and volatility spillovers in spot and futures prices of carbon emissions, crude oil, and coal. A likelihood ratio test is developed to test the multivariate conditional volatility Diagonal BEKK model, which has valid regularity conditions and asymptotic properties, against the alternative Full BEKK model, which has valid regularity conditions and asymptotic properties under the null hypothesis of zero off-diagonal elements. Dynamic hedging strategies using optimal hedge ratios will be suggested to analyse market fluctuations in the spot and futures returns and volatility of carbon emissions, crude oil and coal prices.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Carbon emissions, Fossil fuels, Crude oil, Coal, Low carbon targets, Green energy, Spot and futures prices, Granger causality and volatility spillovers, Likelihood ration test, Diagonal BEKK, Full BEKK, Dynamic hedging.
Subjects:Sciences > Chemistry > Environmental conditions
Sciences > Chemistry > Mineralogy
Social sciences > Economics > Econometrics
JEL:C58, L71, O13, P28, Q42
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2017
Number:15
ID Code:43228
Deposited On:09 Jun 2017 12:46
Last Modified:12 Jun 2017 08:04

Origin of downloads

Repository Staff Only: item control page