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Oil Price Uncertainty and Consumer Sentiment in Advanced Economies

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  • Nahiyan Faisal Azad
  • Apostolos Serletis

Abstract

How does oil price uncertainty affect consumer sentiment in advanced economies? Is the response of consumer sentiment to exogenous positive and negative oil price shocks symmetric or asymmetric? Motivated to answer these questions, this paper provides a comprehensive examination of the effects of real oil price shocks on consumer sentiment in the G7 economies in the context of two classes of empirical models. With the application of a bivariate structural GARCH-in-Mean VAR model we find that (in general) oil price uncertainty has a negative and statistically significant effect on consumer sentiment in the G7 countries. Moreover, using a test of symmetry, we find that the relationship between oil prices and consumer sentiment is in general asymmetric. JEL Classification: C32, D12, Q43, O57

Suggested Citation

  • Nahiyan Faisal Azad & Apostolos Serletis, 2024. "Oil Price Uncertainty and Consumer Sentiment in Advanced Economies," The Energy Journal, , vol. 45(6), pages 159-175, November.
    • Handle: RePEc:sae:enejou:v:45:y:2024:i:6:p:159-175
    DOI: 10.1177/01956574241281163
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    References listed on IDEAS

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    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
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    5. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-744, June.
    6. Davis, Steven J. & Haltiwanger, John, 2001. "Sectoral job creation and destruction responses to oil price changes," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 465-512, December.
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    Cited by:

    1. Zaheer Anwer & Noureddine Benlagha & Nur Ain Shahrier & Amer Almajali, 2025. "Dynamic default‐risk spillover of global energy firms: Evidence from five subsectors," Review of Financial Economics, John Wiley & Sons, vol. 43(4), pages 548-577, October.
    2. Dohyoung Kwon, 2025. "Asymmetric effects of oil price shocks on US business sentiment: evidence from the ISM manufacturing index," Empirical Economics, Springer, vol. 69(6), pages 3227-3249, December.

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    Keywords

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    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
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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