IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/125586.html
   My bibliography  Save this paper

Geopolitical Turning Points and Oil Price Responses: An IV-LP Approach

Author

Listed:
  • Saadaoui, Jamel

Abstract

This paper introduces a novel identification strategy of geopolitical turning points, defined as sharp, unanticipated inflection points in bilateral relations. These shocks are measured using the second difference of the Political Relationship Index (Δ²PRI), an event-based monthly index derived from Chinese sources. Unlike standard geopolitical risk indices, Δ²PRI isolates events that represent exogenous shifts in diplomatic relationships. Using quantile IV-local projections, the paper studies the causal and asymmetric impact of these shocks on global oil prices. An improvement in US–China relations reduces oil prices by 0.2% in the short run and raises them by 0.3% in the medium run, with effects varying across the oil price distribution. The extension to the Japan–China dyad supports external validity. The Δ²PRI instrument offers a reusable framework for analyzing bilateral political shocks across various macroeconomic outcomes, making a methodological contribution to the international economics literature.

Suggested Citation

  • Saadaoui, Jamel, 2025. "Geopolitical Turning Points and Oil Price Responses: An IV-LP Approach," MPRA Paper 125586, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:125586
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/125586/1/MPRA_paper_125586.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • 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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:125586. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.