Causality Relationship in Energy Supply Security, Oil Prices and Stock Markets: BRICS-T Example

Abstract

The aim of the study is to examine the dynamic relations between energy markets and financial markets in the center of the concept of energy supply security. In this direction, the stock market index, oil price and international energy security risk index score covering the annual data for the 1994-2018 period for the BRICS-T countries (Brazil, Russia, India, China, S. Africa and Turkey) were used and Toda & Yamamoto to investigate the aforementioned relationship. (TY) and Fourier Toda & Yamamoto (FTY) causality methods were used to analyze the variables. While empirical findings show (i) causality from stock market to energy security risk in all countries except Brazil, and from energy security risk to stock market only in Turkey, (ii) mutual causality between energy security risk and oil price in China and Turkey, however, in Brazil, it shows that there is causality from oil price to energy security risk. The findings thus reveal the importance of financial markets in terms of energy security risk in the energy-finance relationship for BRICS-T countries. This result includes an inference that the uncertainty and risks arising from the financial markets of these countries should be taken into account in their energy security policies.

Keywords

• Energy Supply Security
• Oil Price
• Stock Market
• Emerging Markets
• Causality

Enerji Arz Güvenliği, Petrol Fiyatları ve Pay Piyasalarında Nedensellik İlişkisi: BRICS-T Örneği

Abstract

Çalışmanın amacı enerji arz güvenliği kavramı merkezinde enerji piyasaları ve finansal piyasalar arasındaki dinamik ilişkileri incelemektir. Bu doğrultuda, BRICS-T ülkeleri için (Brezilya, Rusya, Hindistan, Çin, G. Afrika ve Türkiye) 1994-2018 dönemi yıllık verilerini kapsayan borsa endeksi, petrol fiyatı ve uluslararası enerji güvenliği risk endeks puanı kullanılmış ve söz konusu ilişkiyi araştırmak için Toda & Yamamoto (TY) ve Fourier Toda & Yamamoto (FTY) nedensellik yöntemlerinden yararlanılarak değişkenler analiz edilmiştir. Ampirik bulgular, (i) Brezilya hariç bütün ülkelerde pay senedi piyasasından enerji güvenliği riskine ve yalnızca Türkiye’de enerji güvenliği riskinden pay senedi piyasasına nedensellik, (ii) Çin ile Türkiye’de enerji güvenliği riski ile petrol fiyatı arasında karşılıklı nedensellik ilişkisinin varlığını gösterirken, ancak Brezilya’da ise petrol fiyatından enerji güvenliği riskine nedensellik olduğunu göstermektedir. Bulgular, böylelikle, BRICS-T ülkeleri için enerji-finans ilişkisinde, finansal piyasaların enerji güvenliği riski açısından önemini ortaya koymaktadır. Bu sonuç, bu ülkelerin finans piyasalarından kaynaklı belirsizlik ve risklerin, enerji güvenliği politikalarında dikkate alınması gerektiği yönünde bir çıkarsama içermektedir.

Keywords

• Enerji Arz Güvenliği
• Petrol Fiyatı
• Pay Senedi Piyasaları
• Gelişmekte Olan Ekonomiler
• Nedensellik

References

1. Balcilar, M., Ozdemir, Z.A. and Arslanturk, Y. (2010). Economic growth and energy consumption causal nexus viewed through a bootstrap rolling window. Energy Economics, 32, 1398-1410. https://doi.org/10.1016/j.eneco.2010.05.015
2. Basher, S.A. and Sadorsky, P. (2006). Oil price risk and emerging stock markets. Global Finance Journal, 17(2), 224-251. https://doi.org/10.1016/j.gfj.2006.04.001
3. BP. (2021). Statistical review of world energy. www.bp.com/statisticalreview
4. BRICS. (2021). BRICS overview. Retrieved from https://www.brics2021.gov.in/about-brics/
5. Brown, S.P. and Yücel, M.K. (2002). Energy prices and aggregate economic activity: An interpretative survey. The Quarterly Review of Economics and Finance, 42(2), 193-208. https://doi.org/10.1016/S1062-9769(02)00138-2
6. Caraiani, C., Lungu, C.I. and Dascălu, C. (2015). Energy consumption and GDP causality: A three-step analysis for emerging European countries. Renewable and Sustainable Energy Reviews, 44, 198-210. https://doi.org/10.1016/j.rser.2014.12.017
7. Cong, R.G., Wei, Y.M., Jiao, J.L. and Fan, Y. (2008). Relationships between oil price shocks and stock market: An empirical analysis from China. Energy Policy, 36(9), 3544-3553. https://doi.org/10.1016/j.enpol.2008.06.006
8. Dickey, D.A. and Fuller, W.A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Society, 75, 427–431. https://doi.org/10.1080/01621459.1979.10482531

9. Dolado, J.J. and Lütkepohl, H. (1996). Making Wald tests work for cointegrated VAR systems. Econometric Reviews, 15(4), 369-386. https://doi.org/10.1080/07474939608800362
10. Durusu-Ciftci, D., Soytas, U. and Nazlioglu, S. (2020). Financial development and energy consumption in emerging markets: Smooth structural shifts and causal linkages. Energy Economics, 87, 104729. https://doi.org/10.1016/j.eneco.2020.104729
11. Enders, W. and Lee, J. (2012). The flexible Fourier form and Dickey-Fuller type unit root tests. Economics Letters, 117, 196-199. https://doi.org/10.1016/j.econlet.2012.04.081
12. Eren, B.M., Taspinar, N. and Gokmenoglu, K.K. (2019). The impact of financial development and economic growth on renewable energy consumption: Empirical analysis of India. Science of The Total Environment, 663, 189-197. https://doi.org/10.1016/j.scitotenv.2019.01.323
13. Gozgor, G., Lau, C.K.M. and Lu, Z. (2018). Energy consumption and economic growth: New evidence from the OECD countries. Energy, 153, 27-34. https://doi.org/10.1016/j.energy.2018.03.158
14. Granger, C.W.J. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica, 37, 424–438. https://doi.org/10.2307/1912791
15. Hacker, R.S. and Hatemi-J.A. (2006). Tests for causality between integrated variables using asymptotic and bootstrap distributions: Theory and application. Applied Economics, 38, 1489-1500. https://doi.org/10.1080/00036840500405763
16. Hamilton, J.D. (1983). Oil and the macroeconomy since World War II. Journal of Political Economy, 91(2), 228-248. http://dx.doi.org/10.1086/261140
17. Huang, R.D., Masulis, R.W. and Stoll, H.R. (1996). Energy shocks and financial markets. The Journal of Futures Markets, 16(1), 1-27. https://doi.org/10.1002/(SICI)1096-9934(199602)16:1<1::AID-FUT1>3.0.CO;2-Q
18. Iyke, B.N., Tran, V.T. and Narayan, P.K. (2021). Can energy security predict energy stock returns? Energy Economics, 94, 105052. https://doi.org/10.1016/j.eneco.2020.105052
19. Ji, Q., Liu, B.Y., Zhao, W.L. and Fan, Y. (2020). Modelling dynamic dependence and risk spillover between all oil price shocks and stock market returns in the BRICS. International Review of Financial Analysis, 68, 101238. https://doi.org/10.1016/j.irfa.2018.08.002
20. Jones, C.M, and Kaul, G. (1996). Oil and the stock markets. Journal of Finance, 51(2), 463-491. https://doi.org/10.2307/2329368
21. Jones, D.W., Leiby, P.N. and Paik, I.K. (2004). Oil price shocks and the macroeconomy: What has been learned since 1996. The Energy Journal, 25(2), 1-32. https://doi.org/10.5547/ISSN0195-6574-EJ-Vol25-No2-1
22. Kilian, L. and Park, C. (2009). The impact of oil price shocks on the US stock market. International Economic Review, 50(4), 1267-1287. https://doi.org/10.1111/j.1468-2354.2009.00568.x
23. Küresel Enerji Enstitüsü. (2021). Uluslararası enerji güvenliği risk puanı [Veri seti]. Erişim adresi: https://www.globalenergyinstitute.org/energy-security-risk-index
24. Le, T.H. and Nguyen, C.P. (2019). Is energy security a driver for economic growth? Evidence from a global sample. Energy Policy, 129, 436-451. https://doi.org/10.1016/j.enpol.2019.02.038
25. Mensi, W., Hammoudeh, S., Reboredo, J.C. and Nguyen, D.K. (2014). Do global factors impact BRICS stock markets? A quantile regression approach. Emerging Markets Review, 19, 1-17. https://doi.org/10.1016/j.ememar.2014.04.002
26. Nazlioglu, S. (2021). TSPDLIB: GAUSS time series and panel data methods (Version 2.0): Source code. Retrieved from https://github.com/aptech/tspdlib
27. Nazlioglu, S., Gormus, A. and Soytas, U. (2016). Oil prices and real estate investment trusts (REITs): Gradual-shift causality and volatility transmission analysis. Energy Economics, 60(1), 168-175. https://doi.org/10.1016/j.eneco.2016.09.009
28. Ono, S. (2011). Oil price shocks and stock markets in BRICs. The European Journal of Comparative Economics, 8(1), 29-45. Retrieved from https://eprints.lib.hokudai.ac.jp/
29. Papapetrou, E. (2001). Oil price shocks, stock market, economic activity and employment in Greece. Energy Economics, 23(5), 511-532. https://doi.org/10.1016/S0140-9883(01)00078-0
30. Sadorsky, P. (1999). Oil price shocks and stock market activity. Energy Economics, 21(5), 449-469. https://doi.org/10.1016/S0140-9883(99)00020-1
31. Sebri, M. and Ben-Salha, O. (2014). On the causal dynamics between economic growth, renewable energy consumption, CO2 emissions and trade openness: Fresh evidence from BRICS countries. Renewable and Sustainable Energy Reviews, 39, 14-23. https://doi.org/10.1016/j.rser.2014.07.033
32. Shahbaz, M., Hye, Q.M.A., Tiwari, A.K. and Leitão, N. C. (2013). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renewable and Sustainable Energy Reviews, 25, 109-121. https://doi.org/10.1016/j.eneco.2013.06.006
33. Soytas, U. and Sari, R. (2009). Energy consumption, economic growth, and carbon emissions: Challenges faced by an EU candidate member. Ecological Economics, 68(6), 1667-1675. https://doi.org/10.1016/j.ecolecon.2007.06.014
34. STATISTA. (2021). Enerji ithalatının bağımlılık oranı. Retrieved from https://www.statista.com/statistics/691224/dependency-on-energy-imports-in-turkey/
35. Stavytskyy, A.V., Kharlamova, G., Giedraitis, V. and Šumskis, V. (2018). Estimating the interrelation between energy security and macroeconomic factors in European countries. Journal of International Studies, 11(3), 217-238. https://doi.org/10.14254/2071-8330.2018/11-3/18
36. Toda, H.Y. and Yamamoto, T. (1995). Statistical inference in vector autoregression with possibly integrated processes. Journal of Econometrics, 66, 225–250. https://doi.org/10.1016/0304-4076(94)01616-8
37. TÜİK. (2021). Enerji ithalatı. Erişim adresi: https://data.tuik.gov.tr/Kategori/GetKategori?p=Cevre-ve-Enerji-103
38. Uluslararası Enerji Ajansı. (1985). Energy security. https://www.iea.org/search?q=energy%20supply %20security
39. Ursavaş, N. ve Yıldırım, E. (2017). Enerji arz güvenliği riskinin Türkiye’nin makroekonomik dengelerine etkisi. Bolu Abant İzzet Baysal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 17(4), 55-83. https://doi.org/10.11616/basbed.vi.459379