Estimation of Korean LNG Price Allowing a Structural Change

- Journal title : Environmental and Resource Economics Review
- Volume 24, Issue 4, 2015, pp.679-708
- Publisher : Korean Resource Economics Association
- DOI : 10.15266/KEREA.2015.24.4.679

Title & Authors

Estimation of Korean LNG Price Allowing a Structural Change

Cho, Hong Chong; Han, Wonhee;

Cho, Hong Chong; Han, Wonhee;

Abstract

Almost all of natural gas demand in Korea is currently met by overseas LNG imports. More than 80% of LNG is imported through the mid to long-term contracts with oil-linked pricing. Despite LNG price estimation provides valuable information with various interested parties, an empirical study as well as an econometric model on LNG price hasn`t yet been available in Korea. This paper therefore, aims at analyzing not only whether the long-run equilibrium relationship between oil prices and Korean LNG prices exists but also whether structural change occurred in such relationship. Further, it aims at building a conditional VECM taking account of a structural change. According to the final model, an oil price shock is passed through to the LNG prices in nonlinear and different manner from the past.

Keywords

LNG Price;Cointegration;Structural Change;Conditional VECM;

Language

Korean

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