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Does Energy Consumption Volatility Affect Real GDP Volatility? An Empirical Analysis for the UK

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  • Abdul Rashid

    (International Institute of Islamic Economics (IIIE), International Islamic University (IIU), Islamabad, Pakistan)

  • Ozge Kandemir Kocaaslan

    (Department of Economics, Faculty of Social and Administrative Sciences, Hacettepe University, Ankara, Turkey)

Abstract

This paper empirically examines the relation between energy consumption volatility and unpredictable variations in real gross domestic product (GDP) in the UK. Estimating the Markov switching ARCH model we find a significant regime switching in the behavior of both energy consumption and GDP volatility. The results from the Markov regime-switching model show that the variability of energy consumption has a significant role to play in determining the behavior of GDP volatilities. Moreover, the results suggest that the impacts of unpredictable variations in energy consumption on GDP volatility are asymmetric, depending on the intensity of volatility. In particular, we find that while there is no significant contemporaneous relationship between energy consumption volatility and GDP volatility in the first (low-volatility) regime, GDP volatility is significantly positively related to the volatility of energy utilization in the second (high-volatility) regime.

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  • Abdul Rashid & Ozge Kandemir Kocaaslan, 2013. "Does Energy Consumption Volatility Affect Real GDP Volatility? An Empirical Analysis for the UK," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 384-394.
    • Handle: RePEc:eco:journ2:2013-04-23
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    Cited by:

    1. Samet G nay, 2015. "Markov Regime Switching Generalized Autoregressive Conditional Heteroskedastic Model and Volatility Modeling for Oil Returns," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 979-985.
    2. Besma Talbi, 2015. "Energy Intensity and Economic Growth in the MENA Region: Analyses of Panel Heterogeneous," Bulletin of Energy Economics (BEE), The Economics and Social Development Organization (TESDO), vol. 3(4), pages 169-175, December.
    3. H. Murat Ertuğrul & B. Oray Güngör & Uğur Soytaş, 2021. "The Effect of the COVID-19 Outbreak on the Turkish Diesel Consumption Volatility Dynamics," Energy RESEARCH LETTERS, Asia-Pacific Applied Economics Association, vol. 1(1), pages 1-4.
    4. Sudeshna Ghosh, 2019. "Environmental Pollution, Income Inequality, and Household Energy Consumption: Evidence from the United Kingdom," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-31, June.
    5. Nugroho, Andry Satrio, 2015. "Analisis Ketahanan Minyak di 15 Negara Pengimpor Minyak Tahun 2010 [Analysis of Oil Vulnerability in 15 Oil Importing Countries in 2010]," MPRA Paper 88901, University Library of Munich, Germany.
    6. Gulasekaran Rajaguru & Safdar Ullah Khan, 2021. "Causality between Energy Consumption and Economic Growth in the Presence of Growth Volatility: Multi-Country Evidence," JRFM, MDPI, vol. 14(10), pages 1-26, October.
    7. P. Fulya Gebeşoğlu & Hasan Murat Ertuğrul, 2014. "GDP Volatility Spillovers from the US and EU to Turkey: A Dynamic Investigation," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 51-66, May.

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    More about this item

    Keywords

    energy consumption volatility; GDP volatility; asymmetry; Markov switching ARCH models; Markov regime switching models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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