Asymmetric reactions of the US natural gas market and economic activity

Bao H. Nguyen and Tatsuyoshi Okimoto

Energy Economics, 2019, vol. 80, issue C, 86-99

Abstract: This paper provides new empirical evidence on the asymmetric reactions of the US natural gas market and US economy to its market fundamental shocks. We find that results based on a smooth transition vector autoregressive (STVAR) model provides a plausible and robust explanation to the behavior of the US natural gas market, which asymmetrically reacts in bad times and good times. During times of recession, natural gas production shrinks in response to a positive oil price shock, while the corresponding response is found to be positive in times of expansion. The positive relationship between the price of natural gas and crude oil is found to be more prominent in expansions, especially in the long run. In addition, the results also reveal that US economic activity is much more sensitive to oil and natural gas price shocks occurring in bad times than in good times.

Keywords: Natural gas market; Business cycle; Oil price shock; STVAR model (search for similar items in EconPapers)
JEL-codes: C32 E32 Q4 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Asymmetric Reactions of the U.S. Natural Gas Market and Economic Activity (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:80:y:2019:i:c:p:86-99

DOI: 10.1016/j.eneco.2018.12.015

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