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Network evolution underneath the volatility spillover in traditional and clean energy markets

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  • Jin Chen
  • Yue Chen
  • Qinen Gu
  • Wei Zhou

Abstract

When facing volatility spillovers in energy markets, all players require risk mitigation strategies to insulate themselves from the same. To prevent energy markets from being strongly crashed by volatility spillovers, which even trigger financial crises, in this paper, we use network analysis as an aid to identify spillovers among the main nine energy markets. Specifically, we first measure the volatility spillovers among the main energy markets through a BEKK model. Based on this, influential markets are identified by using network analysis. The coal, wind and water energy markets should be paid close attention as they occupy vital roles in the volatility spillover network. Even though clean energy markets contribute more in terms of market stability, traditional energy markets are still important to ensure energy supply when experiencing extreme crashes caused by COVID-19. In this paper, we make the contributions to analysing volatility spillovers in multiple energy markets and identifying crucial energy markets in volatility spillover networks, then provide more market information that helps the government and policymakers effectively manage systemic risks caused by volatility spillovers. The effective risk management of crucial energy markets enhances economic recovery and stability, especially in the post-COVID-19 era.

Suggested Citation

  • Jin Chen & Yue Chen & Qinen Gu & Wei Zhou, 2023. "Network evolution underneath the volatility spillover in traditional and clean energy markets," Applied Economics, Taylor & Francis Journals, vol. 55(58), pages 6905-6921, December.
  • Handle: RePEc:taf:applec:v:55:y:2023:i:58:p:6905-6921
    DOI: 10.1080/00036846.2023.2166663
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    Cited by:

    1. Jin Chen & Yue Chen & Wei Zhou, 2024. "Relation exploration between clean and fossil energy markets when experiencing climate change uncertainties: substitutes or complements?," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.
    2. Zhou, Wei & Chen, Yan & Chen, Jin, 2024. "Dynamic volatility spillover and market emergency: Matching and forecasting," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).

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