Do oil shocks predict economic policy uncertainty?

Mobeen Ur Rehman

Physica A: Statistical Mechanics and its Applications, 2018, vol. 498, issue C, 123-136

Abstract: Oil price fluctuations have influential role in global economic policies for developed as well as emerging countries. I investigate the role of international oil prices disintegrated into structural (i) oil supply shock, (ii) aggregate demand shock and (iii) oil market specific demand shocks, based on the work of Kilian (2009) using structural VAR framework on economic policies uncertainty of sampled markets. Economic policy uncertainty, due to its non-linear behavior is modeled in a regime switching framework with disintegrated structural oil shocks. Our results highlight that Indian, Spain and Japanese economic policy uncertainty responds to the global oil price shocks, however aggregate demand shocks fail to induce any change. Oil specific demand shocks are significant only for China and India in high volatility state.

Keywords: Global oil shocks; Economic policy uncertainty; Structural VAR (search for similar items in EconPapers)
JEL-codes: E31 E60 Q41 Q43 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:498:y:2018:i:c:p:123-136

DOI: 10.1016/j.physa.2017.12.133

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