Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305583 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11341
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper aims to assess the role of expectations as a determinant of the real price of natural gas. To measure expectations-driven speculative demand three approaches are followed, which are based respectively on using natural gas inventories consistently with the theory of storage (Kilian and Murphy, 2014), the futures spread (Valenti, 2022), and functional shocks defined as shifts in the entire risk-adjusted natural gas futures term structure (Inoue and Rossi, 2021). Three specifications of a structural VAR (SVAR) model are then estimated based on each of those approaches in turn. The results suggest that expectations, especially when measured as functional shocks, lead to strong and persistent increases in the real price of natural gas. A shock decomposition exercise shows that the price of natural gas responds primarily to changes in the curvature of its futures term structure, which indicates that medium-term expectations are the main driver of permanent increases in the spot price of natural gas. Further, the functional natural gas price shocks seem to account for around half of the variation in the real price of natural gas.
Subjects: 
natural gas price
expectations
speculation
inventories
functional shocks
structural VAR (SVAR)
JEL: 
D84
G15
Q41
Q43
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.