The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US

Baris Kocaarslan, Mehmet Soytas () and Ugur Soytas

Energy Economics, 2020, vol. 86, issue C

Abstract: In this study, we investigate the presence of asymmetric interactions between oil prices, oil price uncertainty, interest rates, and unemployment in a cointegration framework. Utilizing the nonlinear auto-regressive distributed lag (NARDL) approach, we show the asymmetric responses of unemployment to changes in oil prices, oil price uncertainty and interest rates in the long-run. More specifically, the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices. On the one hand, reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact. We also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant. Last but not least, we find that option-implied oil price volatility, as a measure of oil price uncertainty, outperforms the conditional volatility of crude oil prices in predicting unemployment. This study provides valuable implications for policymakers to design sound economic policies.

Keywords: Asymmetric effects; Unemployment; Nonlinear ARDL (NARDL); Oil prices; Oil price uncertainty; Interest rates (search for similar items in EconPapers)
JEL-codes: C32 E24 Q43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988319304220

DOI: 10.1016/j.eneco.2019.104625

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