European industrial production in the face of energy dynamics and geopolitical shocks

Kazi Sohag (), Vsevolod Karass and Khorshed Alam

Energy, 2025, vol. 316, issue C

Abstract: We assess the resilience and vulnerability of European industrial production to cyclical hydrocarbon-price shocks, geopolitical risks, and real effective exchange rates. Employing advanced analytical tools such as Panel VAR-GMM and Dynamic Common Correlation Effect (DCCE), we analyse monthly data from January 2000 to June 2023, encompassing 23 selected EU countries. Our findings reveal that European industrial production exhibits a degree of vulnerability to oil price shocks, particularly in the case of manufacturing production. Conversely, the industrial sector demonstrates resilience when faced with shocks in gas prices. Notably, industrial production responds adversely to geopolitical risks and escalations, with the impact being more pronounced in the presence of geopolitically induced hydrocarbon price shocks. Our country-specific analysis underscores significant variations in vulnerability and resilience across the examined nations. The implications of our study extend to the formulation of pertinent policy measures tailored to address the specific challenges identified in each context.

Keywords: Industrial production; Oil price shocks; Geopolitical risks; PVAR; EU (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:316:y:2025:i:c:s0360544225000933

DOI: 10.1016/j.energy.2025.134451

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