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Oil-Price Volatility and Macroeconomic Spillovers in Central and Eastern Europe: evidence from a Multivariate GARCH Model

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  • Scott W. Hegerty

    (Northeastern Illinois University, Department of Economics, Chicago, USA)

Abstract

Recent commodity price declines have added to worldwide macroeconomic risk, which has had serious effects on both commodity exporters and manufacturers that use oil and raw materials. These effects have been keenly felt in Central and Eastern Europe—particularly in Russia, but also in European Union member states. This study tests for spillovers among commodity-price and macroeconomic volatility by applying a VAR(1)-MGARCH model to monthly time series for eight CEE countries. Overall, we find that oil prices do indeed have effects throughout the region, as do spillovers among exchange rates, inflation, interest rates, and output, but that they differ from country to country—particularly when different degrees of transition and integration are considered. While oil prices have a limited impact on the currencies of Russia and Ukraine, they do make a much larger contribution to the two countries’ macroeconomic volatility than do spillovers among the other macroeconomic variables. JEL Classification: F36

Suggested Citation

  • Scott W. Hegerty, 2015. "Oil-Price Volatility and Macroeconomic Spillovers in Central and Eastern Europe: evidence from a Multivariate GARCH Model," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 18(2), pages 31-44, November.
    • Handle: RePEc:zag:zirebs:v:18:y:2015:i:2:p:31-44
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    More about this item

    Keywords

    Oil Prices; Volatility; Multivariate GARCH; Spillovers; Central/Eastern Europe;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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