Long Run Dynamic Volatilities between OPEC and non-OPEC Crude Oil Prices

Ghassan, Hassan B. and Alhajhoj, Hassan R. (2015): Long Run Dynamic Volatilities between OPEC and non-OPEC Crude Oil Prices. Published in: Applied Energy , Vol. 169, No. http://dx.doi.org/10.1016/j.apenergy.2016.02.057 (8 February 2016): pp. 384-394.

Abstract

Understanding the long-run dynamics of OPEC and non-OPEC crude oil prices is important in an era of increased financialization of petroleum markets. Utilizing an ECM within a threshold cointegration and CGARCH errors framework, we provide evidence on the cointegrating relationship and estimate how and to what extent the respective prices adjust to eliminate disequilibrium. Our findings suggest that the adjustment process of OPEC prices to the positive discrepancies is slow which implies that OPEC producers do not prefer moderate oil prices; however, the reverse holds for non-OPEC producers. These results reflect distinct competitive behaviors between OPEC and non-OPEC producers.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dynamic volatility, Threshold cointegration, Component GARCH, OPEC, Oil prices.
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; E - Macroeconomics and Monetary Economics > E0 - General > E03 - Behavioral Macroeconomics; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E39 - Other; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F53 - International Agreements and Observance ; International Organizations; F - International Economics > F6 - Economic Impacts of Globalization > F69 - Other

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