Time varying connectedness between oil shocks and clean energy markets

This article investigates the effects of oil shocks on clean energy markets using the Time-Varying Parameter Vector Autoregression (TVP-VAR) and Structural Vector Autoregression (SVAR) methodologies. By analyzing a dataset that encompasses both oil supply and demand shocks, we evaluate the average Total Connectedness Index (TCI) and its fluctuations throughout the study period. Our findings demonstrate that clean energy markets, particularly the S&P GCE index, primarily act as net shock transmitters within the energy sector, while oil demand shocks function as net recipients of disruptions. Notably, the COVID-19 pandemic caused a notable spike in interconnectedness among the markets, suggesting a significant impact of external shocks on market dynamics. Through a detailed examination of pairwise directional connectivity, we highlight the evolving roles of commodities in the network, revealing that both S&P-GCE and Wilder Hill-GCE display similar patterns in response to demand shocks. These results underscore the intricate interplay between oil shocks and clean energy markets, emphasizing the need for strategic considerations in risk management and policy formulation.