Page 29 - Azerbaijan State University of Economics

THE Luan Vardari, Kiran Sood: Sate-Dependent Transmission of Oil and Electricity Shocks to
Equity Markets: Evidence from Emerging and Transitional Economies

When assessed from this view, macro-financial dynamics and policy responses are
analyzed the same, which highlights the nonlinear dimension, as identified by Bildirici
and Badur (2019) and Raifu and Oshota (2023). By bridging channels of trust, exchange
rates movement, and then the transmission of policies in a regime-dependent context, it
is provided broader and more realistic view when considering how energy and economic
variables price fluctuate and whether they influence market outcomes depending on
regime states and volatility.

Figure 1: Conceptual framework depicting how energy market dynamics transmit to
financial systems under different market conditions.

3.5 Empirical Results and Discussion
This section of the study presents the major empirical results, concentrating on the
stability and reliability of the models explaining the relationship between energy and
financial markets while showing how the framework presented performs according to a
range of empirical tests, being internally valid and congruent. All econometric estimations
were performed in R using the programs rug arch, mGARCH, MSwM and rpanel, among
others, to preserve methodological accuracy and ensure reproducibility. The data set
includes monthly observations from 2010 to 2024 and represents a balanced panel of six
countries: Croatia, Greece, Slovenia, India, South Africa and Vietnam. The empirical
results are summarized in five analytical tables, each of which represents a different stage
of the study: (i) stationarity and cointegration tests; (ii) regime-dependent dynamics
estimated using the MS-VARX model; (iii) transition probabilities between regimes; (iv)
results of the nonlinear Granger causality; and (v) the effects of quantile-based policies,
so that the logical progression of this structure reflects the logical flow of the study's
analytical framework. Following the accepted practices in the energy-finance literature
(e.g., Bildirici & Badur, 2019; Raifu & Oshota, 2023; Bouoiyour et al., 2017; Mokni,
2020), the results are interpreted to enable meaningful comparison with previous research
that looks at asymmetric and regime dependent relationships between energy and
financial markets. The analysis enhances our knowledge of how energy shocks affect
financial systems in a range of economic scenarios by combining methodological rigor
with a comparative viewpoint.

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