Long-term association between European and Indian markets on carbon credit price

Nimisha Kapoor and Sajal Ghosh ()

Renewable and Sustainable Energy Reviews, 2014, vol. 38, issue C, 656-662

Abstract: This study tries to explore cointegration and Granger causality of daily CER prices in European Energy Exchange and Multi Commodity Exchange (MCX) in India in a multivariate framework after controlling euro–rupee exchange rate and Inter-Bank Offer Rate, a measure of country specific risk. Both ARDL bounds tests and Johansen–Juselius maximum likelihood procedures fail to establish a cointegrating relationship among the variables indicating that an arbitrage opportunity exists between these two markets. The study, however, establishes a short-term Granger causality running from change in CER price in European Energy Exchange and exchange rate to Indian exchange. Generalised error variance decomposition of variables indicates that the price of CER at the Indian stock exchange is most endogenous in nature.

Keywords: Certified Emission Reduction; India; EEX; MCX; ARDL; Cointegration; Granger causality (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:rensus:v:38:y:2014:i:c:p:656-662

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DOI: 10.1016/j.rser.2014.07.020

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