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Sources of volatility during four oil price crashes

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  • John Baffes
  • Varun Kshirsagar

Abstract

Previous sharp oil price declines have been accompanied by elevated ex-post volatility. In contrast, volatility was much less elevated during the oil price crash in 2014/15. We provide evidence that oil prices declined in a relatively measured manner during 2014/15, with a dispersion of price changes that was considerably smaller than comparable oil price declines. This finding is robust to using both descriptive and GARCH measures of volatility. Further, the US dollar appreciation exerted a strong influence on volatility during the recent crash; in contrast, the impact of equity market shocks was muted.

Suggested Citation

  • John Baffes & Varun Kshirsagar, 2016. "Sources of volatility during four oil price crashes," Applied Economics Letters, Taylor & Francis Journals, vol. 23(6), pages 402-406, April.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:6:p:402-406
    DOI: 10.1080/13504851.2015.1078435
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    Cited by:

    1. World Bank Group, 2015. "Commodity Markets Outlook, April 2015," World Bank Publications, The World Bank, number 21768.
    2. Gaolu Zou & Kwong Wing Chau, 2020. "Effects of International Crude Oil Prices on Energy Consumption in China," Energies, MDPI, vol. 13(15), pages 1-17, July.
    3. Jeng-Bau Lin & Chin-Chia Liang & Wei Tsai, 2019. "Nonlinear Relationships between Oil Prices and Implied Volatilities: Providing More Valuable Information," Sustainability, MDPI, vol. 11(14), pages 1-15, July.
    4. Jeng-Bau Lin & Wei Tsai, 2019. "The Relations of Oil Price Change with Fear Gauges in Global Political and Economic Environment," Energies, MDPI, vol. 12(15), pages 1-17, August.

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