Page 20 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.83, # 1, 2026, pp. 20-39

State-Dependent Transmission of Oil and Electricity Shocks to

Equity Markets: Evidence from Emerging and Transitional
Economies

2
1
Luan Vardari , Kiran Sood

1 University “Ukshin Hoti” Prizren, Faculty of Economics
ORCHID ID : 0000-0003-3212-5783; [email protected]
2 Chitkara Business School, Chitkara University, Punjab, India
ORCHID ID : 0000-0001-6177-5318;[email protected]
[email protected]

https://doi.org/10.30546/jestp.2026.85.01.0039

Received: December 26, 2025; accepted Aprel 24; published online June 05, 2026

ABSTRACT
The paper will look at the impact of the changes in electricity and oil price on the stock
market performance of the selected emerging and transitional economies, in this case,
Croatia, Greece, Slovenia, India, South Africa and Vietnam in the period 2010-2024. The
analysis examines the relationship between the energy and financial sectors using a panel
Markov-Switching Vector Autoregressive (MS-VARX) model that includes exogenous
variables, which are explained in the analysis. In order to be robust, complementary
methods are also utilized in the study by using copula-based dependence models, DCC-
GARCH estimates, and Markov-Switching Granger estimations. The implications of the
research suggest that changes in oil and electricity prices do not exert uniform effects on
stock markets. Their impact is conditional and varies over time, and importantly appears
stronger during periods of high stock market volatility, and that this link between energy
prices and stock market returns may also be conditioned by exchange rate movements. In
order to minimize potential negative effects and maintain financial stability, policymakers
may wish to encourage the adoption of renewable energy, for example by offering feed-
in tariff policies or phasing out energy subsidies. Through a cross-country comparison,
this research contributes to the understanding of the nonlinear relationships between
energy and financial systems, and that the implications will be useful for policymakers
interested in developing a stronger link between these same sectors and promoting a
sustainable shift towards cleaner energy sources.

Keywords: Oil shocks; Electricity markets; Stock returns; Regime switching; DCC-
GARCH

JEL codes: C32 · Q43 · G15 · O13

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