Title: Causality in quantiles and dynamic relations in energy markets
Authors: Jonas Andersson - Norwegian School of Economics (Norway) [presenting]
Evangelos Kyritsis - Norwegian School of Economics (Norway)
Abstract: The aim is to investigate the non-linear causal relationships between crude oil price and a set of energy prices, namely diesel, gasoline, heating, and natural gas prices, from the perspective of conditional quantiles, by using monthly data for the United States over the period from January 1997 to December 2017. As opposed to a large part of the literature that tests non-causality in a certain moment, we test the null hypothesis of non-causality in various quantile intervals. By doing so, we provide more insights about the complete causal relationship, since the latter is better described by a portfolio of local measures of causality computed in different locations of the conditional distribution than a one-number measure of causality. We find significant causal relationships between the employed energy prices, especially in the tail quantiles, but also a bi-directional causal relationship between energy prices for which the classical Granger non-causality test suggests otherwise.