A closer look into the global determinants of oil price volatility

Ioannis Chatziantoniou, Michail Filippidis, George Filis and David Gabauer

Energy Economics, 2021, vol. 95, issue C

Abstract: In this paper we investigate global determinants of oil price volatility by employing a time-varying parameter vector autoregressive (TVP-VAR) model. We focus on realised volatility and consider the impact from a set of potential determinants including oil supply, oil demand, oil inventory, financial market uncertainty, financial interbank stress, as well as, financial trends in different currencies. We investigate the impact of these factors on realised volatility utilising monthly data over the period 1990:1–2019:5. Findings show that all factors can be conducive to higher levels of realised oil price volatility particularly in the short run. What can further be noticed, is that the magnitude of the corresponding impulse response functions may differ across time and this could largely be attributed to specific intervals of financial crises and economic recessions. Nevertheless, we show that shocks originating to the financial markets tend to be more important for oil price volatility. Our findings are closely linked to the implications regarding the financialisation of the oil market.

Keywords: Financial indicators; Oil-market specific fundamental factors; Oil price volatility; TVP-VAR (search for similar items in EconPapers)
JEL-codes: C32 C51 Q40 Q43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:95:y:2021:i:c:s0140988320304321

DOI: 10.1016/j.eneco.2020.105092

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