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Assessment of the asymmetric impacts of the geopolitical risk on oil market dynamics

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  • Oguzhan Ozcelebi
  • Kaya Tokmakcioglu

Abstract

This study employs the time‐varying parameter structural vector autoregression (TVP‐SVAR) models to assess the asymmetric effects of the geopolitical risk (GPR) on oil production and oil prices for BRIC countries and in the global scale. Although slope‐based asymmetry tests deriving from non‐linear VAR model of Kilian and Vigfusson suggest that the effects on oil production and oil prices are symmetric, the directions and the magnitude of the impulse response functions (IRFs) of TVP‐SVAR models did not confirm the relevant relationship. More specifically, it was revealed that the rise/fall of the GPR of Brazil, Russia and India can lead to increasing/decreasing oil prices. While our findings imply that changes in oil prices may not be a factor affecting the oil production through the changes in GPR, we stress that the increase/decrease of GPRs affect the future economic expectations negatively/positively which in turn leads to a change in the oil production.

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  • Oguzhan Ozcelebi & Kaya Tokmakcioglu, 2022. "Assessment of the asymmetric impacts of the geopolitical risk on oil market dynamics," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 275-289, January.
    • Handle: RePEc:wly:ijfiec:v:27:y:2022:i:1:p:275-289
    DOI: 10.1002/ijfe.2151
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    Cited by:

    1. Karol Szafranek & Michał Rubaszek & Gazi Salah Uddin, 2023. "The role of uncertainty and sentiment for intraday volatility connectedness between oil and financial markets," KAE Working Papers 2023-095, Warsaw School of Economics, Collegium of Economic Analysis.
    2. Li, Sufang & Tu, Dalun & Zeng, Yan & Gong, Chenggang & Yuan, Di, 2022. "Does geopolitical risk matter in crude oil and stock markets? Evidence from disaggregated data," Energy Economics, Elsevier, vol. 113(C).
    3. Tin Hei Alpha Yuen & Wai Kee Thomas Yuen, 2022. "Relationship Between Geopolitical Risk In Major Oil Producing Countries and Oil Price," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 117-123, September.

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