Connectedness of energy markets around the world during the COVID-19 pandemic

• Published in: Energy economics 2022-05, Vol.109, p.105900-105900, Article 105900
• Main Authors: Akyildirim, Erdinc, Cepni, Oguzhan, Molnár, Peter, Uddin, Gazi Salah
• Format: Article
• Language: English
• Subjects: Connectedness; COVID-19; Diversification; Economics; Energy; Energy economics; Energy markets; Exports; Imports; Oil; Pandemics; Panel data; Petroleum; Uncertainty
• ISSN: 0140-9883; 1873-6181; 1873-6181
• DOI: 10.1016/j.eneco.2022.105900

This paper studies the connectedness among energy equity indices of oil-exporting and oil-importing countries around the world. For each country, we construct time-varying measures of how much shocks this country transmits to other countries and how much shocks this country receives from other countries. We analyze the network of countries and find that, on average, oil-exporting countries are mainly transmitting shocks, and oil-importing countries are mainly receiving shocks. Furthermore, we use panel data regressions to evaluate whether the connectedness among countries is influenced by economic sentiment, uncertainty, and the global COVID-19 pandemic. We find that the connectedness among countries increases significantly in periods of uncertainty, low economic sentiment, and COVID-19 problems. This implies that diversification benefits across countries are severely reduced exactly during crises, that is, during the times when diversification benefits are most important. •We study the connectedness among energy equity indices around the world.•Oil-exporting countries are mainly transmitting shocks.•Oil-importing countries are mainly receiving shocks.•Connectedness is high in times of uncertainty, low economic sentiment, and COVID-19.