Uncertainty and oil volatility: New evidence

Dexiang Mei, Qing Zeng, Xiang Cao and Xiaohua Diao

Physica A: Statistical Mechanics and its Applications, 2019, vol. 525, issue C, 155-163

Abstract: In this study, we first investigate the impacts of economic policy uncertainty (EPU), monetary policy uncertainty (MPU), and both of them on oil market volatility. We have several noteworthy findings. First, the EPU index can significantly increase the predictive ability compared to benchmark model for the oil market. Second, the high MPU index leads to high fluctuations with respect to oil market, and can remarkably help in forecasting oil volatility. Third, we first find that the MPU and EPU have useful complementary information, and considered both of them together is more powerful to predict oil volatility than separate them. Our conclusions are robust to different forecasting windows, measures and monetary policy uncertainty.

Keywords: Volatility forecasting; Oil market; Economic policy uncertainty; Monetary policy uncertainty; GARCH-MIDAS (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:525:y:2019:i:c:p:155-163

DOI: 10.1016/j.physa.2019.03.043

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