Spillover effects between oil and natural gas prices: Evidence from emerging and developed markets

Abstract

In this paper, we highlight and empirically analyze the spillover effect of oil and natural gas prices between emerging and developed countries over the period from December 2001 to Jun 2017. A Granger causality test and the DY spillover index are used to investigate the connectedness in energy markets of the USA, Europe, and China. Our main findings are that oil and natural gas markets have significant Granger causality. Furthermore, the emerging markets play an important influencing role on many developed markets both in returns and volatility spillover systems. The spillover index between different markets has clear time-varying characteristics and a strong correlation with specific events. These results can have good applicability in practice.