• Energy Research
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Abstract This paper revisits the topic of natural gas market integration across Europe. Against the backdrop of three EU gas directives aimed at creating competition and strengthening market connections, and the move towards hub trading and gas-on-gas pricing in the European markets, we adopt and extend the spillovers index due to Diebold and Yilmaz (2009) to examine the path of market connectivity over the period between 2005:7–2018:12. An initial estimation uncovers what might be deemed a ‘clunky’ evolution in the spillover index. We identify the cause of this, and devise a tilted ‘importance weighting based re-sampling’ rolling window estimation strategy which preserves the underlying evolutionary trend without overly weighting the importance of historic outliers. Our results show that although there are periods of deterioration, the level of market connectivity recovers, producing a generally increasing trend of market integration in our sample period. The connectivity index peaks at around 65%, i.e. a little above halfway through to full connectivity. We conclude that the European natural gas market has achieved a non-trivial, albeit not full, level of integration to-date.

Were the large investments in energy and transportation infrastructure effective in fostering economic growth? Or did economic growth trigger these infrastructure developments? To answer these questions, we develop a simple model of production capacity constraints and use China’s Western Development Strategy (WDS) as an example to investigate how the relationships among energy investment, transportation infrastructure expansion and economic growth differ in the pre- and post-WDS periods. Our Granger causality analysis uses a panel data sample for China’s 30 provinces in the Western and non-Western regions for the period of 1991-2012. We find Granger causality only in the post-WDS period from transportation infrastructure expansion to economic growth and from economic growth to energy investment. These results suggest energy and transportation capacity constraints in the post-WDS period but not the pre-WDS period. Their policy implication is that China should continue its energy and transportation infrastructure investments with improved coordination.