This paper examines the effect of geopolitical risk (GPR) on return and volatility dynamics in Middle East and North African (MENA) countries by using an ADCC-GARCH model and a spillover approach. Unlike previous studies, we include the GPR index to capture risk associated with wars, terrorist acts, and political tensions. Moreover, we test for both static and dynamic analysis using a rolling window. In brief, the findings highlight that GPR does not contribute to the return spillovers among MENA financial markets. However, the dynamic analysis provides evidence of the high level of responsiveness of the total spillover index to major political events (e.g., the Arab Spring uprising and political tension between Qatar and other Gulf Cooperation Council countries). More interestingly, Qatar, Kingdom of Saudi Arabia, and the United Arab Emirates are identified as the main transmitters of return spillovers to the rest of the MENA markets. Overall, our results are essential in understanding the impact of the GPR on return spillover among MENA countries, and are of particular importance to policymakers, market regulators, portfolio managers and investors.

This paper examines the effects of the COVID-19 pandemic on CDS, stock returns, and economic activity in the US and the five European countries that have been most affected: the UK, Germany, France, Italy, and Spain. The sample period covers the period from 11 March 2020 to 19 February 2021. In the empirical analysis, first, we estimate benchmark linear VAR models and then, given the evidence of parameter instability, TVP-VAR models with stochastic volatility, which are ideally suited to capturing the changing dynamics in both financial markets and the real economy. The linear VAR responses of CDS to the number of COVID-19 cases are positive and statistically significant, whilst those of electricity consumption are insignificant and those of stock returns vary across countries in terms of their sign and significance. The results from the TVP-VAR analysis indicate that the effects of shocks on the system variables was more pronounced during the initial stages of the pandemic and then decreased in the following months. Specifically, there was a positive impact of the number of COVID-19 cases on CDS and a negative one on stock returns and economic activity, the latter two being interlinked.

This study examines the convergence of renewable energy consumption in G-7 countries. We employ LM unit root and RALS version of LM unit root tests with endogenously determined with structural one or two breaks. Despite the increase in renewable energy consumption in G-7 countries, it is important to identify whether renewable energy consumption converges across these countries to formulate appropriate policies to support sustainable energy consumption and reduce CO2 emissions. Our analysis indicated that Germany, Italy, and Canada exhibit evidence of convergence. However, after employing both the LM and RALS versions of the LM unit root tests, which consider level shifts with one or two breaks or trend shifts with one or two breaks, we found that there is no evidence of convergence for France, Japan, and the United Kingdom. Overall, our results highlight the importance of formulating country-specific policies to support renewable energy consumption and reduce CO2 emissions. Policymakers need to identify the drivers of renewable energy consumption and adopt appropriate measures to ensure that the countries can meet their climate goals while also ensuring energy security.

This study aims to analyze the impact of oil shocks on the external balance of Saudi Arabia, as one of the largest net oil-exporting countries. To this end, a time-varying parameter vector autoregression model (TVP-VAR) is estimated by using quarterly data covering the period between 1991: Q1 and 2021: Q4. We find that identifying the source of shocks plays an important role in understanding the time-varying impact of shocks on its economy. Our findings indicate that the global oil production shocks excluding Saudi Arabia have a negative and significant impact on the trade balance and are greater than the impact of the Saudi oil production shocks, which is not significant for most of the period. In addition, we found that oil price shocks have more profound and much greater impacts than global and domestic oil supply shocks. This may be attributed to the fact that oil price shocks are more than oil supply shocks, and supply shocks are linked to oil price shocks. However, impulse responses show that the effects of oil shocks are volatile over time and their effects are generally more pronounced during and immediately after global shocks. Our findings have serious implications for the trade balance of Saudi Arabia, particularly in the low and volatile oil price environment.