Impact of shocks on australian coal mining

Abstract

Purpose and Methodology: Coal has enormous importance for the Australian economy: Australia is one of the largest exporters of black coal in the world and the significant share of electricity generation in Australia is produced using brown coal. This study investigates whether shocks to Australian black and brown coal mining sector have permanent or temporary effects using Chow (1960) and Quandt-Andrews (Andrews, Econometrica 61(4):821-856, 1993; Andrews and Ploberger, Econometrica 62(6):1383-1414, 1994) tests for structural breaks and Zivot and Andrews (J Bus Econ Stat 10(3):251-270, 1992) and Clemente- Montanes-Reyes (Econ Lett 59(2):175-182, 1998) unit root tests with one and two structural breaks. Findings: Results indicate that impact of shocks on export of black coal is likely to be temporary and permanent for black and brown coal production. Practical Implications: This study has important implications for industrial and energy conservation policies and firm level strategies as well as for modeling and forecasting purposes. For instance, if shocks to coal production are persistent, this is likely to be transmitted to other sectors of the economy and the key macroeconomic variables such as employment levels. Originality/Value: This study found that proper modeling specifications for Australian black and brown coal production and black coal exports should include structural breaks. In addition, since exports of coal were found to be stationary, shocks to exports will result in a temporary deviation from the long-term growth trajectory. Stationarity of exports also implies that it is possible to forecast future export levels based on the past values, which will be of no use for brown and black coal production. © Springer-Verlag London 2013.