Journal of Information Processing Systems

Korea Information Processing Society (한국정보처리학회)
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The Determinants and their Time-Varying Spillovers on Liquefied Natural Gas Import Prices in China Based on TVP-FAVAR Model

  • Ying Huang (School of Economic and Management, Wuchang Shouyi University) ;
  • Yusheng Jiao (School of Economic and Management, Wuchang Shouyi University)
  • Received : 2023.03.23
  • Accepted : 2023.10.09
  • Published : 2024.02.29
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Abstract

China is playing more predominant role in the liquefied natural gas (LNG) market worldwide and LNG import price is subject to various factors both at home and abroad. Nevertheless, previous studies rarely heed a multiple of factors. A time-varying parameter factor augmented vector auto-regression (TVP-FAVAR) model is adopted to discover the determinants of China's LNG import price and their dynamic impacts from January 2012 to December 2021. According to the findings, market fundamentals have a greater impact on the import price of natural gas in China than overall economic demand, financial considerations, and world oil prices. The primary determinants include domestic gas consumption, consumer confidence and other demand-side information. Then, there are diverse and time-varying spillover effects of the four common determinants on the volatility of China's LNG import price at different intervals and time nodes. The price volatility is more sensitive and long-lasting to domestic natural gas pricing reform than other negative shocks such as the Sino-US trade war and the COVID-19 pandemic. The results in this study further proves the importance of domestic natural gas market liberalization. China ought to do more to support the further marketization of natural gas prices while working harder to guarantee natural gas supplies.

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