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

dc.contributor.authorRentschler, Jun E.
dc.date.accessioned2013-09-25T21:00:13Z
dc.date.available2013-09-25T21:00:13Z
dc.date.issued2013-09
dc.description.abstractThis 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.identifierhttp://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy
dc.identifier.urihttps://hdl.handle.net/10986/15829
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 6603
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADVERSE EFFECTS
dc.subjectALTERNATIVE ENERGIES
dc.subjectAPPROACH
dc.subjectAVAILABILITY
dc.subjectBALANCE
dc.subjectBILATERAL TRADE
dc.subjectBUSINESS INVESTMENTS
dc.subjectCLIMATE
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE POLICIES
dc.subjectCOAL
dc.subjectCOMMODITIES
dc.subjectCOMMODITY
dc.subjectCOMMODITY MARKETS
dc.subjectCOMMODITY PRICE
dc.subjectCONSUMER PRICE
dc.subjectCONSUMER PRICE INDICES
dc.subjectCRUDE OIL
dc.subjectCRUDE OIL IMPORTS
dc.subjectCRUDE OIL PRICE
dc.subjectCURRENCY
dc.subjectDEMAND FOR OIL
dc.subjectDEVELOPING COUNTRIES
dc.subjectDOMESTIC EXCHANGE
dc.subjectDOMESTIC INFLATION
dc.subjectDOMESTIC OIL
dc.subjectDOMESTIC OIL CONSUMPTION
dc.subjectDOMESTIC OIL PRODUCTION
dc.subjectDOMESTIC PRODUCTION
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC BENEFITS
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC INDICATORS
dc.subjectECONOMIC STRUCTURES
dc.subjectECONOMIC UNCERTAINTY
dc.subjectEMERGING ECONOMIES
dc.subjectEMPLOYMENT
dc.subjectENERGY DEMAND
dc.subjectENERGY ECONOMICS
dc.subjectENERGY INVESTMENTS
dc.subjectENERGY MARKETS
dc.subjectENERGY MIX
dc.subjectENERGY NEEDS
dc.subjectENERGY POLICY
dc.subjectENERGY PORTFOLIO
dc.subjectENERGY PRICES
dc.subjectENERGY SOURCE
dc.subjectENERGY SOURCES
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE FLUCTUATIONS
dc.subjectEXOGENOUS SUPPLY
dc.subjectEXPOSURE
dc.subjectEXTERNAL MARKETS
dc.subjectFACTOR PRICE
dc.subjectFEDERAL RESERVE
dc.subjectFEDERAL RESERVE BANK
dc.subjectFINANCIAL ANALYSIS
dc.subjectFISCAL POLICIES
dc.subjectFISCAL POLICY
dc.subjectFOSSIL
dc.subjectFOSSIL FUEL
dc.subjectFOSSIL FUELS
dc.subjectFUEL
dc.subjectFUEL PRODUCTION
dc.subjectFUTURE PRICE
dc.subjectGAS
dc.subjectGEOTHERMAL POWER
dc.subjectGLOBAL ECONOMY
dc.subjectGLOBAL MARKET
dc.subjectGLOBAL MARKETS
dc.subjectGLOBAL OIL MARKETS
dc.subjectHYDROPOWER
dc.subjectINFLATION
dc.subjectINPUT PRICES
dc.subjectINTERNATIONAL MARKETS
dc.subjectINTERNATIONAL TRADING
dc.subjectINVESTMENT DECISIONS
dc.subjectLABOR MARKET
dc.subjectLOWER PRICE
dc.subjectMARKET FLUCTUATIONS
dc.subjectMARKET PRICE
dc.subjectMARKET PRICES
dc.subjectMARKET REGULATION
dc.subjectMARKET RETURNS
dc.subjectMARKET VOLATILITY
dc.subjectMONETARY ECONOMICS
dc.subjectMONETARY POLICY
dc.subjectNATURAL GAS
dc.subjectNET OIL
dc.subjectNUCLEAR ENERGY
dc.subjectNUCLEAR POWER
dc.subjectOIL
dc.subjectOIL EXPORTER
dc.subjectOIL EXPORTERS
dc.subjectOIL EXPORTS
dc.subjectOIL IMPORTER
dc.subjectOIL IMPORTS
dc.subjectOIL MARKETS
dc.subjectOIL PRICE
dc.subjectOIL PRICES
dc.subjectOIL PRODUCING
dc.subjectOIL PRODUCING COUNTRIES
dc.subjectOIL SHOCKS
dc.subjectOUTPUT
dc.subjectPETROLEUM
dc.subjectPETROLEUM IMPORTS
dc.subjectPETROLEUM INDUSTRY
dc.subjectPOLICY MAKERS
dc.subjectPOLITICAL ECONOMY
dc.subjectPORTFOLIOS
dc.subjectPOWER
dc.subjectPRICE CHANGE
dc.subjectPRICE CHANGES
dc.subjectPRICE DECREASES
dc.subjectPRICE FLUCTUATIONS
dc.subjectPRICE INCREASE
dc.subjectPRICE INCREASES
dc.subjectPRICE INDEX
dc.subjectPRICE MOVEMENTS
dc.subjectPRICE OF OIL
dc.subjectPRICE STABILITY
dc.subjectPRICE UNCERTAINTY
dc.subjectPRICE VOLATILITY
dc.subjectPRICES OF COAL
dc.subjectPRODUCTION COSTS
dc.subjectRENEWABLE ENERGIES
dc.subjectRENEWABLE ENERGY
dc.subjectRENEWABLE POWER
dc.subjectRISK MANAGEMENT
dc.subjectSCENARIOS
dc.subjectSOURCE OF ENERGY
dc.subjectSPOT MARKET
dc.subjectSTOCK MARKET
dc.subjectSUBSTITUTE
dc.subjectSUPPLY SHOCKS
dc.subjectSURPLUS
dc.subjectSUSTAINABLE DEVELOPMENT
dc.subjectSUSTAINABLE ENERGY
dc.subjectTAX
dc.subjectTRADING ACTIVITIES
dc.subjectUNCERTAINTIES
dc.subjectVOLATILE PRICES
dc.subjectWORLD ECONOMY
dc.subjectWORLD ENERGY
dc.titleOil Price Volatility, Economic Growth and the Hedging Role of Renewable Energyen
dspace.entity.typePublication
okr.crosscuttingsolutionareaClimate Change
okr.date.disclosure2013-09-01
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2013/09/18260093/oil-price-volatility-economic-growth-hedging-role-renewable-energy
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.globalpracticeTrade and Competitiveness
okr.globalpracticeEnergy and Extractives
okr.guid466161468130801325
okr.identifier.doi10.1596/1813-9450-6603
okr.identifier.externaldocumentum000158349_20130916160608
okr.identifier.internaldocumentum18260093
okr.identifier.reportWPS6603
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/09/16/000158349_20130916160608/Rendered/PDF/WPS6603.pdfen
okr.region.administrativeEast Asia and Pacific
okr.region.administrativeEurope and Central Asia
okr.region.administrativeSouth Asia
okr.topicEnergy::Energy Demand
okr.topicMacroeconomics and Economic Growth::Climate Change Economics
okr.topicPrivate Sector Development::Emerging Markets
okr.topicMacroeconomics and Economic Growth::Markets and Market Access
okr.topicEnergy::Energy Production and Transportation
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublication30005afb-5036-51b6-b3fb-626d539c298a
relation.isAuthorOfPublication.latestForDiscovery30005afb-5036-51b6-b3fb-626d539c298a
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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