Do multiple bubbles exist in coal price?. (October 2021)

• Record Type: Journal Article
• Authors: Khan, Khalid; Su, Chi-Wei; Rehman, Ashfaq U.
• Is Part Of: Resources policy. Volume 73(2021)
• Publication Date: 2021-10
• Subjects: Coal price bubble -- Energy consumption -- Supply security -- Generalized -- Supremum ADF; Q02 -- B41 -- E30; Mines and mineral resources -- Periodicals; Ressources minérales -- Périodiques; Ressources naturelles -- Gestion -- Périodiques; Environnement -- Politique gouvernementale -- Périodiques; 333.8
• DOI: 10.1016/j.resourpol.2021.102232
• Languages: English
• ISSNs: 0301-4207

Abstract

Abstract: This study examines whether there are multiple bubbles in the coal price (CLP) employing the most suitable Supremum Augmented Dickey-Fuller (SADF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) approach. The results show that CLP deviates three times from the fundamental price, indicates the existence of multiple bubbles. This specifies the start and termination of bubbles around a specific event. The oil price shocks, economic growth, technological developments, supply security concern, geopolitical situation and the crisis of overproduction cause the first bubble. Similarly, robust global economic growth, rising freight rates, and potential investment prospects are the leading factors of the second CLP bubble. However, the third bubble is caused by rapid demand from emerging economies, rising oil prices, and financial recession. The logit regression suggests that oil prices and electricity consumption have a positive impact on CLP bubbles, while coal consumption negatively explains the CLP. It provides useful information about the causes of the various stakeholders in the market, which should be followed continuously to avoid the crisis. Similarly, a mechanism should be developed to successfully detect the detrimental effects of shocks on the international coal market. Highlights: Analyze the coal price bubbles. The results indicate the existence of multiple bubbles. Oil price, economic growth, supply security concern and geopolitical caused first bubble. Robust global economic growth, rising freight rates, and potential investment prospects results in second bubble. Rapid demand of emerging economies, rising oil prices, and financial recession leads third bubble.