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

Jiaqi Guo, Shaobo Long and Weijie Luo

International Review of Financial Analysis, 2022, vol. 83, issue C

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.

Keywords: Climate policy uncertainty; Financial speculation; Economic activity; Crude oil prices; Natural gas prices (search for similar items in EconPapers)
JEL-codes: C32 F30 G15 Q40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002423

DOI: 10.1016/j.irfa.2022.102286

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