Causality in Quantiles and Dynamic Relations in Energy Markets

Evangelos Kyritsis and Jonas Andersson

No 116, Working Papers from VATT Institute for Economic Research

Abstract: In this paper we investigate the dynamic relations between crude oil price returns and a set of energy price returns, namely diesel, gasoline, heating, and the natural gas. This is performed by means of Granger non-causality tests for US spot closing prices over the period from January 1997 to December 2017. In previous studies this has been done by testing for the added predictive value of including lagged values of one energy price return in predicting the conditional expectation of another. In this paper, we instead focus on different ranges of the full conditional distribution within the framework of a dynamic quantile regression model, and identify the quantile ranges from which causality arises. The results constitute a richer set of findings than what is possible by just considering a single moment of the conditional distribution, which can be useful for implementing better substitution investment strategies and effective policy interventions. We find several interesting one-directional dynamic relations between the employed energy prices, especially in the tail quantiles, but also a bi-directional causal relation between energy prices for which the classical Granger non-causality test suggests otherwise. Our results are robust to alternative measures of the price of oil and different data frequencies.

Keywords: Energy price returns; Granger non-causality; Quantile regression; Tail quantiles; Environment; energy and climate policy; C22; G14; Q41; Energia; ilmasto ja ympäristö (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.doria.fi/handle/10024/168041

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fer:wpaper:116

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().