Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73779
Authors: 
Gronwald, Marc
Year of Publication: 
2009
Series/Report no.: 
Ifo Working Paper 75
Abstract: 
This paper studies the dynamic behavior of daily oil prices and finds strong evidenceof GARCH as well as conditional jump behavior. This implies that conditional heteroscedasticity is present and the empirical distribution of oil price changes has heavy tails. Thus, the oil price considerably sensitive to news and does not settle around a long-run trend. This finding has several important implications: First, this financial market variable-type behaviour hampers finding optimal depletion paths of oil as exhaustible resource as well as optimal decisions regarding the transmission to alternative technologies. Second, as the usage of oil is one of the main sources of carbon emissions, this non-existence of a clear long-run trend is likely to cause a current overextraction of oil, accompanied by severe consequences for the global climate.
Subjects: 
Oil price
conditional jumps
GARCH
Hotelling
climate change
JEL: 
C22
Q30
Document Type: 
Working Paper

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