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Measuring natural resources rents volatility: Evidence from EGARCH and TGARCH for global data

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  • Ni, Xiewen
  • Wang, Zanxin
  • Akbar, Ahsan
  • Ali, Sher

Abstract

Natural resources and their impact on various economic and non-economic indicators have been a topic of interest for the last few decades. However, natural resources volatility has been relatively less explored by researchers. Following the recent trend, this study measures natural resource volatility from a global perspective. This study used the data for total natural resources rents (TNR), coal rents (CR) oil rents (ORR) and natural gas rents (NGR) over the extended period from 1970 to 2021. Appropriate measures of volatility in time variables, the threshold generalized autoregressive conditional heteroscedasticity (TGARCH) and the exponential generalized autoregressive conditional heteroscedasticity (EGARCH) models are used to measure volatility in the study variables. Empirical findings of the study asserted that the TNR, CR, and ORR are volatile in the selected time period. Instead of stability, these rents follow an unstable path during the study period. In contrast, no volatility has been observed in NGR. Besides, the TGARCH and EGARCH approach revealed that the influence of negative shock is greater and stronger on the three volatile variables. Events such as the energy price hike, Gulf war, Asian financial crisis, the global financial crisis, and others are the events that report higher volatility. Based on the empirical findings, this study suggests price ceiling or price freezing policies, natural resources hedging, isolation of natural resources rents from external shocks to tackle volatility in natural resources rents.

Suggested Citation

  • Ni, Xiewen & Wang, Zanxin & Akbar, Ahsan & Ali, Sher, 2022. "Measuring natural resources rents volatility: Evidence from EGARCH and TGARCH for global data," Resources Policy, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:jrpoli:v:76:y:2022:i:c:s030142072200006x
    DOI: 10.1016/j.resourpol.2022.102553
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