Do multiple bubbles exist in coal price?

This study examines whether there are multiple bubbles in the coal price (CLP) employing the most suitable Supremum Augmented Dickey-Fuller (SADF) and Generalized Supremum Augmented Dickey-Fuller (GSADF) approach. The results show that CLP deviates three times from the fundamental price, indicates the existence of multiple bubbles. This specifies the start and termination of bubbles around a specific event. The oil price shocks, economic growth, technological developments, supply security concern, geopolitical situation and the crisis of overproduction cause the first bubble. Similarly, robust global economic growth, rising freight rates, and potential investment prospects are the leading factors of the second CLP bubble. However, the third bubble is caused by rapid demand from emerging economies, rising oil prices, and financial recession. The logit regression suggests that oil prices and electricity consumption have a positive impact on CLP bubbles, while coal consumption negatively explains the CLP. It provides useful information about the causes of the various stakeholders in the market, which should be followed continuously to avoid the crisis. Similarly, a mechanism should be developed to successfully detect the detrimental effects of shocks on the international coal market.

Automated summary

The study utilizes SADF and GSADF methods to identify multiple bubbles in coal prices, each caused by different factors. Additionally, positive impacts of oil prices and electricity consumption on the bubbles are observed.