Geopolitical risk and vulnerability of energy markets

Authors

Qiang JI, Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, ChinaFollow

Document Type

Research-Article

Author

Zhenhua Liu, Yushu Wang, Xinting Yuan, Zhihua Ding, Qiang Ji

Journal Name

Energy Economics

Keywords

Energy market, GARCH-MIDAS model, Geopolitical risk, Vulnerability

Abstract

Geopolitical risk, as a key determinant of energy supply, greatly influences the vulnerability of energy markets. This study develops a novel energy market vulnerability index—which measures the level and dynamics in vulnerability of energy markets from market risk perspective—using a quantile connectedness approach for the first time. Then, by introducing a generalized autoregressive conditional heteroskedasticity–mixed-data sampling (GARCH-MIDAS) model, we explore the impact and predictive role of geopolitical risk on the vulnerability of energy markets. We find that the vulnerability of energy markets showed an upward trend and fluctuated considerably during 2007–2024. Moreover, geopolitical risk positively affects the vulnerability of energy markets. Finally, the vulnerability of energy markets can be forecasted better by the predictor, geopolitical risk. Our results offer useful insights for investors and policy-makers in the energy markets. © 2024 Elsevier B.V.

https://doi.org/10.1016/j.eneco.2024.108055

Recommended Citation

JI, Qiang (2025) "Geopolitical risk and vulnerability of energy markets," Double Helix Methodology: Vol. 6: Iss. 1, Article 9.
Available at: https://diis-mips.researchcommons.org/helix-content/vol6/iss1/9