A Markov regime-switching model of crude oil market integration

Konstantin Kuck and Karsten Schweikert

Journal of Commodity Markets, 2017, vol. 6, issue C, 16-31

Abstract: This paper revisits the globalization-regionalization hypothesis for the world crude oil market. We examine long-run equilibrium relationships between major crude oil prices–WTI, Brent, Bonny Light, Dubai and Tapis–and focus on the adjustment behaviour following disequilibrium states. We account for a changing adjustment behaviour over time by using a Markov-switching vector error correction model. Our overall findings suggest that the crude oil market is globalized. Dubai turned out to be the only weakly exogenous price in all regimes, indicating its important role as a benchmark price. Furthermore, an interesting finding of our study is that the degree of market integration seems to be connected to global economic uncertainty.

Keywords: Crude oil; Market integration; Cointegration; Markov-switching vector error correction model (search for similar items in EconPapers)
JEL-codes: C32 Q41 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2405851316301155
Full text for ScienceDirect subscribers only

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:eee:jocoma:v:6:y:2017:i:c:p:16-31

DOI: 10.1016/j.jcomm.2017.03.001

Access Statistics for this article

Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard

More articles in Journal of Commodity Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().