Advanced Search
MyIDEAS: Login to save this paper or follow this series

Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty

Contents:

Author Info

  • Nikolaos Antonakakis

    (nikolaos.antonakakis@wu.ac.at)

  • Ioannis Chatziantoniou

    ()
    (Department of Economics and Finance, University of Portsmouth)

  • George Filis

    ()
    (Department of Accounting, Finance and Economics, Bournemouth University)

Abstract

This study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil-exporting and net oil-importing countries over the period 1997:01-2013:06. To achieve that, we extend the Diebold and Yilmaz (2009, 2012) dynamic spillover index using structural decomposition. The results reveal that economic policy uncertainty (oil price shocks) responds negatively to aggregate demand oil price shocks (economic policy uncertainty shocks). Furthermore, during the Great Recession of 2007-2009, total spillovers increase considerably, reaching unprecedented heights. Moreover, in net terms, economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009, while in the post-2009 period there is a significant role for supply-side and oil specific demand shocks, as net transmitters of spillover effects. These results are important for policy makers, as well as, investors interested in the oil market.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://epub.wu.ac.at/4082/1/wp166.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp166.

as in new window
Length:
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:wiw:wiwwuw:wuwp166

Note: PDF Document
Contact details of provider:
Postal: Welthandelsplatz 1, 1020 Vienna, Austria
Web page: http://www.wu.ac.at/economics/en

Related research

Keywords: Policy uncertainty; Oil price shock; Spillover index; Structural Vector Autoregression; Variance Decomposition; Impulse Response Function;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. El Anshasy, Amany A. & Bradley, Michael D., 2012. "Oil prices and the fiscal policy response in oil-exporting countries," Journal of Policy Modeling, Elsevier, Elsevier, vol. 34(5), pages 605-620.
  2. Carstensen, Kai & Elstner, Steffen & Paula, Georg, 2013. "How much did oil market developments contribute to the 2009 recession in Germany?," Munich Reprints in Economics, University of Munich, Department of Economics 19935, University of Munich, Department of Economics.
  3. Francis X. Diebold & Kamil Yilmaz, 2010. "Better to Give than to Receive: Predictive Directional Measurement of Volatility Spillovers," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1001, Koc University-TUSIAD Economic Research Forum, revised Mar 2010.
  4. A. Malliaris & Mary Malliaris, 2013. "Are oil, gold and the euro inter-related? Time series and neural network analysis," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 40(1), pages 1-14, January.
  5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, Econometric Society, vol. 48(1), pages 1-48, January.
  6. Francesco Lippi & Andrea Nobili, 2010. "Oil and the Macroeconomy: A Quantitative Structural Analysis," EIEF Working Papers Series 1009, Einaudi Institute for Economics and Finance (EIEF), revised Apr 2010.
  7. Nathan S. Balke & Stephen P.A. Brown & Mine K. Yücel, 2010. "Oil price shocks and U.S. economic activity: an international perspective," Working Papers, Federal Reserve Bank of Dallas 1003, Federal Reserve Bank of Dallas.
  8. Pietro Veronesi & Lubos Pastor, 2011. "Uncertainty about Government Policy and Stock Prices," 2011 Meeting Papers 86, Society for Economic Dynamics.
  9. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 119-147, September.
  10. Pástor, Ľuboš & Veronesi, Pietro, 2013. "Political uncertainty and risk premia," Journal of Financial Economics, Elsevier, Elsevier, vol. 110(3), pages 520-545.
  11. Weiqi Tang & Libo Wu & ZhongXiang Zhang, 2009. "Oil Price Shocks and Their Short- and Long-Term Effects on the Chinese Economy," Economics Study Area Working Papers, East-West Center, Economics Study Area 102, East-West Center, Economics Study Area.
  12. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2013. "Dynamic co-movements of stock market returns, implied volatility and policy uncertainty," Economics Letters, Elsevier, Elsevier, vol. 120(1), pages 87-92.
  13. John Elder & Apostolos Serletis, 2010. "Oil Price Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 42(6), pages 1137-1159, 09.
  14. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
  15. Cunado, J. & Perez de Gracia, F., 2005. "Oil prices, economic activity and inflation: evidence for some Asian countries," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 45(1), pages 65-83, February.
  16. Jean-Marc Natal, 2009. "Monetary policy response to oil price shocks," Working Paper Series, Federal Reserve Bank of San Francisco 2009-16, Federal Reserve Bank of San Francisco.
  17. Montoro, Carlos, 2012. "Oil Shocks And Optimal Monetary Policy," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 16(02), pages 240-277, April.
  18. Rahman, Sajjadur & Serletis, Apostolos, 2011. "The Asymmetric Effects Of Oil Price Shocks," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 15(S3), pages 437-471, November.
  19. Kang, Wensheng & Ratti, Ronald A., 2013. "Structural oil price shocks and policy uncertainty," MPRA Paper 49007, University Library of Munich, Germany.
  20. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 26(C), pages 227-243.
  21. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.
  22. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  23. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  24. Stavros Degiannakis & George Filis & Renatas Kizys, 2013. "Oil price shocks and stock market volatility: evidence from European data," Working Papers, Bank of Greece 161, Bank of Greece.
  25. Afonso, António & Furceri, Davide, 2008. "Government size, composition, volatility and economic growth," Working Paper Series, European Central Bank 0849, European Central Bank.
  26. Filis, George & Degiannakis, Stavros & Floros, Christos, 2011. "Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries," International Review of Financial Analysis, Elsevier, Elsevier, vol. 20(3), pages 152-164, June.
  27. Du, Limin & Yanan, He & Wei, Chu, 2010. "The relationship between oil price shocks and China's macro-economy: An empirical analysis," Energy Policy, Elsevier, Elsevier, vol. 38(8), pages 4142-4151, August.
  28. Byrne, Joseph P. & Davis, E. Philip, 2004. "Permanent and temporary inflation uncertainty and investment in the United States," Economics Letters, Elsevier, Elsevier, vol. 85(2), pages 271-277, November.
  29. Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers, Trinity College Dublin, Department of Economics 20022, Trinity College Dublin, Department of Economics.
  30. Ma, Linwei & Liu, Pei & Fu, Feng & Li, Zheng & Ni, Weidou, 2011. "Integrated energy strategy for the sustainable development of China," Energy, Elsevier, Elsevier, vol. 36(2), pages 1143-1154.
  31. Ma, Linwei & Fu, Feng & Li, Zheng & Liu, Pei, 2012. "Oil development in China: Current status and future trends," Energy Policy, Elsevier, Elsevier, vol. 45(C), pages 43-53.
  32. Kilian, Lutz & Lewis, Logan, 2009. "Does the Fed Respond to Oil Price Shocks?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7594, C.E.P.R. Discussion Papers.
  33. Francis X. Diebold & Kamil Yılmaz, 2007. "Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 0705, Koc University-TUSIAD Economic Research Forum.
  34. Jesus Fernandez-Villaverde & Pablo Guerron-Quintana & Keith Kuester & Juan Rubio-Ramirez, 2011. "Fiscal Volatility Shocks and Economic Activity," PIER Working Paper Archive 11-022, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  35. Lutz Kilian & Cheolbeom Park, 2009. "The Impact Of Oil Price Shocks On The U.S. Stock Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1267-1287, November.
  36. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, American Economic Association, vol. 99(3), pages 1053-69, June.
  37. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, Elsevier, vol. 58(1), pages 17-29, January.
  38. Matteo Manera & Alessandro Cologni, 2005. "Oil Prices, Inflation and Interest Rates in a Structural Cointegrated VAR Model for the G-7 Countries," Working Papers, Fondazione Eni Enrico Mattei 2005.101, Fondazione Eni Enrico Mattei.
  39. Filis, George, 2010. "Macro economy, stock market and oil prices: Do meaningful relationships exist among their cyclical fluctuations?," Energy Economics, Elsevier, Elsevier, vol. 32(4), pages 877-886, July.
  40. Zhang, Xiao-Bing & Fan, Ying & Wei, Yi-Ming, 2009. "A model based on stochastic dynamic programming for determining China's optimal strategic petroleum reserve policy," Energy Policy, Elsevier, Elsevier, vol. 37(11), pages 4397-4406, November.
  41. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 228-48, April.
  42. Yuan, Jia-Hai & Kang, Jian-Gang & Zhao, Chang-Hong & Hu, Zhao-Guang, 2008. "Energy consumption and economic growth: Evidence from China at both aggregated and disaggregated levels," Energy Economics, Elsevier, Elsevier, vol. 30(6), pages 3077-3094, November.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwwuw:wuwp166. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.