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10-02
1002
201012
02 2011.2.8 11:8 AM 1 3 MAC2PDF_IN 300DPI 175LPI T
10-02
2011.2.8 11:28 AM 2 3 MAC2PDF_IN 300DPI 175LPI T
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2009 1 ,
84% .
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(implication) .
Markowitz(1952) -(mean-variance model)
(dominance principle)
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(market risk)
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Markowitz(1952) -
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26.5%,
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45.8%, 27.7%
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2009
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Abstract i
ABSTRACT
1. Research Purpose
In 2009, approximately 84% of primary energy consumption in
Korea was composed of fossil fuels such as oil, natural gas, and coal.
Moreover, because the Korean economy have entirely imported all of
fossil fuels, fluctuations of international prices of fossil fuels have
seriously affected not only economic performances, but also formation
of energy policy.
In fact, as fossil fuels are highly correlated with each other, the
fluctuations of international prices of fossil fuels can be decomposed
into two components: a common and idiosyncratic part. Therefore,
employing Markowitz's mean-variance model, we are able to interpret
the common part of the fluctuations of international prices of fossil
fuels as the market risk which all fossil fuels are confronted with. On
the other hand, the idiosyncratic part can be thought as the
idiosyncratic risk which comes from peculiar and specific market
conditions of each fossil fuel. As a result, the idiosyncratic risk of the
fluctuations of the international price of each fossil fuel could be
minimized by properly constructing a portfolio of the fossil fuel
consumption. Thus, decomposing the fluctuations of international
prices of fossil fuels into these two parts and employing the portfolio
selection theory make it possible to construct an optimal fossil energy
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consumption portfolio which minimize risks of a return from energy
consumption, given each return level.
The main purpose of our study is to construct this hypothetical
energy consumption portfolio, based on the modern financial theory.
This optimal energy consumption portfolio might be used as a
reference to evaluate the current energy consumption structure and to
rebuild energy policy.
2. Summary
In constructing the optimal energy consumption portfolio, we define
returns on fossil fuel consumption as TOE (Ton of Oil Equivalent)
per 1 cent. In general, as the calorie unit for TOE of each fossil fuel
is not altered, fluctuations of the growth rate of returns on each fossil
fuel consumption presented by the TOE unit mainly is due to the
fluctuations of the international price of each fossil fuel. Hence, the
optimal fossil fuel consumption portfolio to minimize variations of the
growth rates of returns is same to the fossil fuel consumption
portfolio to minimize variations of the growth rates of international
prices of fossil fuels.
To construct the optimal fossil fuel consumption portfolio, first we
decompose the growth rates of returns into two parts, the common
and idiosyncratic part, using the dynamic latent common factor model.
Then, based on the dominance principle indicated by the
Abstract iii
mean-variance model, we construct the efficient frontier of fossil fuel
consumption portfolio. Meanwhile, before building the efficient
frontier, we empirically investigate how the common part of the
growth rates of returns on fossil fuel consumption react to certain
structural shocks to global economic conditions, employing a SVAR
(Structural Vector Autoregression Model). Thus, we identify two
structural shocks, aggregate demand and supply shocks in the global
economy, and then, estimate the impulse response functions of the
common part.
Our finding is that in response to shocks to increase aggregate
demand, the common part of the growth rates of returns rises. It
means that shocks to increase the aggregate demand in the global
economy increase international prices of the fossil fuels. However, the
common part declines in response to shocks to increase total factor
productivity of the global economy. It means that since a rise in total
factor productivity increases the marginal product of fossil fuels, the
shocks to total factor productivity decreases the growth rates of
returns on fossil fuels.
The optimal fossil fuel consumption portfolio, which has the
smallest risk of the growth rates of returns, on the efficient frontier
implied by the mean-variance model is consisted of the following
consumption combination of fossil fuels : 26.5% of oil, 45.8% of
natural gas and 27.7% of coal. Furthermore, based on the portfolios of
fossil fuel consumption on the effective frontier, the actual fossil fuel
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consumption portfolio of the Korean economy in 2009 seems to be
somewhat inefficient.
3. Research Results and Policy Implications
In our study, it has been turned out that oil is the primary factor to
deteriorate returns on the fossil fuel consumption portfolio and to
increase variations of the returns. This result is in line with the recent
studies which indicate decreasing dependency on oil consumption
alleviates the effects of oil shocks on the economy. Therefore, our
results show that it is crucial to change the current energy
consumption structure by substituting other energy resources for oil, in
order to improve returns on the fossil fuel consumption portfolio. In
addition, it is also important to develop more efficient energy
technology and improve total factor productivity.
One limitation of our study is that we only consider the calorie unit
for TOE to calculate returns on fossil fuel consumption. However, as
fossil fuels considered in our study usually emit greenhouse gases,
they cause social costs, causing air pollution. Thus, it is important to
include these socal costs in calculating returns on the fossil fuel
consumption. We leave this task for our future research.
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2. 15
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2. (Sign Restrictions) 42
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() 34
() 34
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1 72
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[ -1] 12
[ -2] 17
[ -1] 36
[ -2] 36
[ -3] 37
[ V-1] 52
[ V-2] 54
[ -1] - 59
[ -1] 66
[ -2] 67
[ -3] ( ) 69
[ -4] ( ) 70
1
2009 1 ,
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Pindyck(1999) 127 ,
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Pindyck(1999)
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Pindyck and Rotemberg(1999)
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Cashin, McDermott and Scott(1999)
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Palaskas and Varangis(1991), Palaskas(1993),