Climate change and fossil fuel prices : a GARCH-MIDAS analysis

dc.contributor.authorTumala, Mohammed M.
dc.contributor.authorSalisu, Afees A.
dc.contributor.authorNmadu, Yaaba B.
dc.date.accessioned2023-11-24T10:20:15Z
dc.date.issued2023-08
dc.description.abstractIn this study, we investigate the connection between climate change and the volatility of fossil fuel prices using the GARCH-MIDAS framework which accommodates mixed data frequencies and by extension circumvents information loss due to splicing or aggregation of one variable for the other. We conduct a battery of robustness tests that allow for nominal and real prices of fossil fuels as well as global financial crises (GFC). We show a strong connection between climate change and the volatility of fossil fuel prices albeit with stronger evidence in the post-GFC period. The outcome is positive in the recent period and therefore climate change seems to have heightened the volatility in the fossil fuel market. Even when the real prices are considered, results remain consistent, indicating that inflationary pressures do not diminish the effect of climate change on fossil fuel price volatility. We also show that own market risk positively impacts the volatility of fossil fuel prices and the volatility tends to persist when there is a shock to the fossil fuel market. More conscious efforts are needed to effectively discourage increased investments in environmentally-degrading assets.en_US
dc.description.departmentEconomicsen_US
dc.description.embargo2025-06-17
dc.description.librarianhj2023en_US
dc.description.sdgSDG-08:Decent work and economic growthen_US
dc.description.sdgSDG-13:Climate actionen_US
dc.description.urihttps://www.elsevier.com/locate/eneecoen_US
dc.identifier.citationTumala, M.M., Salisu, A. & Nmadu, Y.B. 2023, 'Climate change and fossil fuel prices: a GARCH-MIDAS analysis', Energy Economics, vol. 124 , art. 106792, pp. 1-9, doi : 10.1016/j.eneco.2023.106792.en_US
dc.identifier.issn0140-9883 (print)
dc.identifier.issn1873-6181 (online)
dc.identifier.other10.1016/j.eneco.2023.106792
dc.identifier.urihttp://hdl.handle.net/2263/93424
dc.language.isoenen_US
dc.publisherElsevieren_US
dc.rights© 2023 Elsevier B.V. All rights reserved. Notice : this is the author’s version of a work that was accepted for publication in Energy Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. A definitive version was subsequently published in Energy Economics, vol. 124 , art. 106792, pp. 1-9, 2023, doi : 10.1016/j.eneco.2023.106792.en_US
dc.subjectFossil fuel pricesen_US
dc.subjectClimate changeen_US
dc.subjectPredictabilityen_US
dc.subjectGlobal financial crisis (GFC)en_US
dc.subjectGARCH-MIDASen_US
dc.subjectVolatilityen_US
dc.subjectGeneralized autoregressive conditional heteroskedasticity (GARCH)en_US
dc.subjectMixed data sampling (MIDAS)en_US
dc.subjectSDG-13: Climate actionen_US
dc.subjectSDG-08: Decent work and economic growthen_US
dc.titleClimate change and fossil fuel prices : a GARCH-MIDAS analysisen_US
dc.typePostprint Articleen_US

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