Testing for Granger causality in distribution tails: An application to oil markets integration

B. Candelon, M. Joëts, S. Tokpavi

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper proposes an original procedure which allows for testing of Granger-causality for multiple risk levels across tail distributions, hence extending the procedure proposed by Hong et al. (2009). Asymptotic and finite sample properties of the test are considered. This new Granger-causality framework is applied for a set of regional oil markets series. It helps to tackle two main questions 1) Whether oil markets are more or less integrated during periods of extreme energetic prices movements and 2) Whether price-setter markets change during such periods. Our findings indicate that the integration level between crude oil markets tends to decrease during extreme periods and that price-setter markets also change. Such results have policy implication and stress the importance of an active energetic policy during episode of extreme movements. (C) 2012 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)276-285
Number of pages10
JournalEconomic Modelling
Volume31
DOIs
Publication statusPublished - Mar 2013

Keywords

  • Extreme risk spillovers
  • Granger-causality in risk
  • Distribution tails
  • Value-at-Risk
  • Crude oil markets integration
  • CONDITIONAL SKEWNESS
  • REGRESSION QUANTILES
  • LONG-RUN
  • RISK
  • AUTOCORRELATIONS
  • REGIONALIZATION
  • INFLATION
  • PRICES
  • SHOCKS

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