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The dynamic spillover effects of climate policy uncertainty and coal price on carbon price: Evidence from China

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  • Yan, Wan-Lin
  • Cheung, Adrian (Wai Kong)

Abstract

This paper applies the time-varying parameters vector autoregression (TVP-VAR) model to investigate the dynamic effects of climate policy uncertainty and coal price on carbon price in China. Based on news from China's mainstream newspapers and websites, a tailor-made climate policy uncertainty index is constructed. The VAR-BEKK-GARCH model is utilized as robustness check. The results indicate that both the climate policy uncertainty and coal price have significant time-varying effects on the carbon price. Additional dynamic connectedness analysis reveals that coal price is the main shock transmitter while climate policy uncertainty and carbon price are mostly net shock receivers.

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  • Yan, Wan-Lin & Cheung, Adrian (Wai Kong), 2023. "The dynamic spillover effects of climate policy uncertainty and coal price on carbon price: Evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322005773
    DOI: 10.1016/j.frl.2022.103400
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    More about this item

    Keywords

    Dynamic spillover effect; The time-varying parameters vector autoregression model; Carbon price; Climate policy uncertainty; Coal price;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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