The objective of this dissertation
was
to investigate the relationship between
natural gas price
s delivered at Henry Hub and West Texas Intermediate
(WTI)
crude oil prices. The presence of a long run cointegrating relationship
was
revealed
.
Furthermore, a
vector error correction model was estimated to
examine the short run relationship, which
is
influenced by exogenous factors
.
The findings suggest that the
WTI crude
oil prices are weakly exogenous
.
In
addition, impulse response functions
and variance decompositions were
constructed to provide us with the dynamic interaction between the Henry Hub
natural gas and WTI crude oil prices
. The
results that were obtained indicate a
positive
response of natural gas to
a shock in crude oil
and
point out
the
importance of crud
e oil in explaining natural gas
.
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