Publication:
Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy

dc.contributor.author Rentschler, Jun E.
dc.date.accessioned 2013-09-25T21:00:13Z
dc.date.available 2013-09-25T21:00:13Z
dc.date.issued 2013-09
dc.description.abstract This paper investigates the adverse effects of oil price volatility on economic activity and the extent to which countries can hedge against such effects by using renewable energy. By considering the Realized Volatility of oil prices, rather than following the standard approach of considering oil price shocks in levels, the effects of factor price uncertainty on economic activity are analyzed. Sample countries represent developed and developing, oil importing and exporting and service/industry-based economies (United States, Japan, Germany, South Korea, India, and Malaysia) and thus complement the standard literature's analysis of Western OECD countries. In a vector auto-regressive setting, Granger causality tests, impulse response functions, and variance decompositions show that oil price volatility has more-adverse effects in all sample countries than oil price shocks alone can explain. The paper finds that the sensitivity to oil price volatility varies widely across countries and discusses various factors which may determine the level of sensitivity (such as sectoral composition and the energy mix). This implies that the standard approach of solely considering net oil importer-exporter status is not sufficient. Simulations of volatility shocks in hypothetical energy mixes (with increased renewable shares) illustrate the potential economic benefits resulting from efforts to disconnect the macroeconomy from volatile commodity markets. It is concluded that expanding renewable energy can in principle reduce an economy's vulnerability to oil price volatility, but a country-specific analysis would be necessary to identify concrete policy measures. Overall, the paper provides an additional rationale for reducing exposure and vulnerability to oil price volatility for the sake of economic growth. en
dc.identifier http://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy
dc.identifier.uri http://hdl.handle.net/10986/15829
dc.language English
dc.language.iso en_US
dc.publisher World Bank, Washington, DC
dc.relation.ispartofseries Policy Research Working Paper;No. 6603
dc.rights CC BY 3.0 IGO
dc.rights.holder World Bank
dc.rights.uri http://creativecommons.org/licenses/by/3.0/igo/
dc.subject ADVERSE EFFECTS
dc.subject ALTERNATIVE ENERGIES
dc.subject APPROACH
dc.subject AVAILABILITY
dc.subject BALANCE
dc.subject BILATERAL TRADE
dc.subject BUSINESS INVESTMENTS
dc.subject CLIMATE
dc.subject CLIMATE CHANGE
dc.subject CLIMATE POLICIES
dc.subject COAL
dc.subject COMMODITIES
dc.subject COMMODITY
dc.subject COMMODITY MARKETS
dc.subject COMMODITY PRICE
dc.subject CONSUMER PRICE
dc.subject CONSUMER PRICE INDICES
dc.subject CRUDE OIL
dc.subject CRUDE OIL IMPORTS
dc.subject CRUDE OIL PRICE
dc.subject CURRENCY
dc.subject DEMAND FOR OIL
dc.subject DEVELOPING COUNTRIES
dc.subject DOMESTIC EXCHANGE
dc.subject DOMESTIC INFLATION
dc.subject DOMESTIC OIL
dc.subject DOMESTIC OIL CONSUMPTION
dc.subject DOMESTIC OIL PRODUCTION
dc.subject DOMESTIC PRODUCTION
dc.subject ECONOMIC ACTIVITY
dc.subject ECONOMIC BENEFITS
dc.subject ECONOMIC GROWTH
dc.subject ECONOMIC INDICATORS
dc.subject ECONOMIC STRUCTURES
dc.subject ECONOMIC UNCERTAINTY
dc.subject EMERGING ECONOMIES
dc.subject EMPLOYMENT
dc.subject ENERGY DEMAND
dc.subject ENERGY ECONOMICS
dc.subject ENERGY INVESTMENTS
dc.subject ENERGY MARKETS
dc.subject ENERGY MIX
dc.subject ENERGY NEEDS
dc.subject ENERGY POLICY
dc.subject ENERGY PORTFOLIO
dc.subject ENERGY PRICES
dc.subject ENERGY SOURCE
dc.subject ENERGY SOURCES
dc.subject EXCHANGE RATE
dc.subject EXCHANGE RATE FLUCTUATIONS
dc.subject EXOGENOUS SUPPLY
dc.subject EXPOSURE
dc.subject EXTERNAL MARKETS
dc.subject FACTOR PRICE
dc.subject FEDERAL RESERVE
dc.subject FEDERAL RESERVE BANK
dc.subject FINANCIAL ANALYSIS
dc.subject FISCAL POLICIES
dc.subject FISCAL POLICY
dc.subject FOSSIL
dc.subject FOSSIL FUEL
dc.subject FOSSIL FUELS
dc.subject FUEL
dc.subject FUEL PRODUCTION
dc.subject FUTURE PRICE
dc.subject GAS
dc.subject GEOTHERMAL POWER
dc.subject GLOBAL ECONOMY
dc.subject GLOBAL MARKET
dc.subject GLOBAL MARKETS
dc.subject GLOBAL OIL MARKETS
dc.subject HYDROPOWER
dc.subject INFLATION
dc.subject INPUT PRICES
dc.subject INTERNATIONAL MARKETS
dc.subject INTERNATIONAL TRADING
dc.subject INVESTMENT DECISIONS
dc.subject LABOR MARKET
dc.subject LOWER PRICE
dc.subject MARKET FLUCTUATIONS
dc.subject MARKET PRICE
dc.subject MARKET PRICES
dc.subject MARKET REGULATION
dc.subject MARKET RETURNS
dc.subject MARKET VOLATILITY
dc.subject MONETARY ECONOMICS
dc.subject MONETARY POLICY
dc.subject NATURAL GAS
dc.subject NET OIL
dc.subject NUCLEAR ENERGY
dc.subject NUCLEAR POWER
dc.subject OIL
dc.subject OIL EXPORTER
dc.subject OIL EXPORTERS
dc.subject OIL EXPORTS
dc.subject OIL IMPORTER
dc.subject OIL IMPORTS
dc.subject OIL MARKETS
dc.subject OIL PRICE
dc.subject OIL PRICES
dc.subject OIL PRODUCING
dc.subject OIL PRODUCING COUNTRIES
dc.subject OIL SHOCKS
dc.subject OUTPUT
dc.subject PETROLEUM
dc.subject PETROLEUM IMPORTS
dc.subject PETROLEUM INDUSTRY
dc.subject POLICY MAKERS
dc.subject POLITICAL ECONOMY
dc.subject PORTFOLIOS
dc.subject POWER
dc.subject PRICE CHANGE
dc.subject PRICE CHANGES
dc.subject PRICE DECREASES
dc.subject PRICE FLUCTUATIONS
dc.subject PRICE INCREASE
dc.subject PRICE INCREASES
dc.subject PRICE INDEX
dc.subject PRICE MOVEMENTS
dc.subject PRICE OF OIL
dc.subject PRICE STABILITY
dc.subject PRICE UNCERTAINTY
dc.subject PRICE VOLATILITY
dc.subject PRICES OF COAL
dc.subject PRODUCTION COSTS
dc.subject RENEWABLE ENERGIES
dc.subject RENEWABLE ENERGY
dc.subject RENEWABLE POWER
dc.subject RISK MANAGEMENT
dc.subject SCENARIOS
dc.subject SOURCE OF ENERGY
dc.subject SPOT MARKET
dc.subject STOCK MARKET
dc.subject SUBSTITUTE
dc.subject SUPPLY SHOCKS
dc.subject SURPLUS
dc.subject SUSTAINABLE DEVELOPMENT
dc.subject SUSTAINABLE ENERGY
dc.subject TAX
dc.subject TRADING ACTIVITIES
dc.subject UNCERTAINTIES
dc.subject VOLATILE PRICES
dc.subject WORLD ECONOMY
dc.subject WORLD ENERGY
dc.title Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy en
dspace.entity.type Publication
okr.crosscuttingsolutionarea Climate Change
okr.date.disclosure 2013-09-01
okr.doctype Publications & Research :: Policy Research Working Paper
okr.doctype Publications & Research
okr.docurl http://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy
okr.globalpractice Macroeconomics and Fiscal Management
okr.globalpractice Finance and Markets
okr.globalpractice Trade and Competitiveness
okr.globalpractice Energy and Extractives
okr.identifier.doi 10.1596/1813-9450-6603
okr.identifier.externaldocumentum 000158349_20130916160608
okr.identifier.internaldocumentum 18260093
okr.identifier.report WPS6603
okr.language.supported en
okr.pdfurl http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/09/16/000158349_20130916160608/Rendered/PDF/WPS6603.pdf en
okr.region.administrative East Asia and Pacific
okr.region.administrative Europe and Central Asia
okr.region.administrative South Asia
okr.topic Energy :: Energy Demand
okr.topic Macroeconomics and Economic Growth :: Climate Change Economics
okr.topic Private Sector Development :: Emerging Markets
okr.topic Macroeconomics and Economic Growth :: Markets and Market Access
okr.topic Energy :: Energy Production and Transportation
okr.unit Development Research Group (DECRG)
okr.volume 1 of 1
relation.isAuthorOfPublication 30005afb-5036-51b6-b3fb-626d539c298a
relation.isSeriesOfPublication 26e071dc-b0bf-409c-b982-df2970295c87
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