Work

Spillover effects between energy uncertainty and financial risk in the Eurozone banking sector

Year: 2024

Type: article

Abstract: This paper investigates the connection between energy uncertainty and banking credit risk within the Eurozone. To analyze this relationship, we first apply a Bayesian time-varying VAR model to examine how shocks in energy uncertainty influence financial risk. Next, we use the impulse response function to assess how these shocks propagate through the banking sector. Further, long-run Granger causality is employed to investigate the causal pathways of shock transmission. Our empirical findings show clear patterns: banking credit risk increases in response to energy uncertainty shocks. Over time, these shocks show a progressively rising impact on credit risk, highlighting the growing influence of energy uncertainty on the spread of financial risk.

Source: Energy Economics

DOI: 10.1016/j.eneco.2024.108082

Authors: Vincenzo Pacelli, Caterina Di Tommaso, Matteo Foglia, Maria Melania Povia

Institution: University of Bari Aldo Moro

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Affordable and clean energy

Open Access status: hybrid

Estimated APC paid: $3,680