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How Do International Stock Markets Respond To Oil Demand And Supply Shocks?

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  • Güntner, Jochen H. F.

Abstract

Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper studies the responses of a broader set of stock markets in six OECD member countries. The focus is on the differences and commonalities in the response of stock prices in net oil exporting and net oil importing economies during 1974-2011. Structural oil price shocks aid our understanding of historical fluctuations in stock returns - in particular of the 2008 stock market crash. I find that unexpected shortfalls in global oil supply have no significant impact on the stock market in any of the six countries. While an increase in global aggregate demand consistently raises oil prices and cumulative stock returns, the effect is more persistent for net oil exporters and more pronounced for Norway. Other, e. g., precautionary oil demand shocks have a detrimental impact on the stock market in oil importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil prices account for a larger fraction of the forecast error variance in global relative to national stock returns.
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Suggested Citation

  • Güntner, Jochen H. F., 2014. "How Do International Stock Markets Respond To Oil Demand And Supply Shocks?," Macroeconomic Dynamics, Cambridge University Press, vol. 18(08), pages 1657-1682, December.
  • Handle: RePEc:cup:macdyn:v:18:y:2014:i:08:p:1657-1682_00
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    References listed on IDEAS

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    Cited by:

    1. Diaz, Elena Maria & Molero, Juan Carlos & Perez de Gracia, Fernando, 2016. "Oil price volatility and stock returns in the G7 economies," Energy Economics, Elsevier, vol. 54(C), pages 417-430.
    2. Misund, Bård, 2015. "Reserves Replacement and Oil and Gas Company Shareholder returns," UiS Working Papers in Economics and Finance 2015/11, University of Stavanger.
    3. Yue-Jun Zhang & Ting Yao & Ling-Yun He, 2015. "Forecasting crude oil market volatility: can the Regime Switching GARCH model beat the single-regime GARCH models?," Papers 1512.01676, arXiv.org.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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