ABSTRACT
The paper will look at the impact of the changes in electricity and oil price on the stock market performance of the selected emerging and transitional economies, in this case, Croatia, Greece, Slovenia, India, South Africa and Vietnam in the period 2010-2024. The analysis examines the relationship between the energy and financial sectors using a panel Markov-Switching Vector Autoregressive (MS-VARX) model that includes exogenous variables, which are explained in the analysis. In order to be robust, complementary methods are also utilized in the study by using copula-based dependence models, DCC-GARCH estimates, and Markov-Switching Granger estimations. The implications of the research suggest that changes in oil and electricity prices do not exert uniform effects on stock markets. Their impact is conditional and varies over time, and importantly appears stronger during periods of high stock market volatility, and that this link between energy prices and stock market returns may also be conditioned by exchange rate movements. In order to minimize potential negative effects and maintain financial stability, policymakers may wish to encourage the adoption of renewable energy, for example by offering feed-in tariff policies or phasing out energy subsidies. Through a cross-country comparison, this research contributes to the understanding of the nonlinear relationships between energy and financial systems, and that the implications will be useful for policymakers interested in developing a stronger link between these same sectors and promoting a sustainable shift towards cleaner energy sources.

Keywords: Oil shocks; Electricity markets; Stock returns; Regime switching; DCC-GARCH
JEL codes: C32 · Q43 · G15 · O13



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