Oil price uncertainty and the Canadian economy: Evidence from a VARMA, GARCH-in-Mean, asymmetric BEKK model
Sajjadur Rahman and
Apostolos Serletis ()
Energy Economics, 2012, vol. 34, issue 2, pages 603-610
In this paper we build on recent work by Elder and Serletis (2010, forthcoming) and Rahman and Serletis (forthcoming) and investigate the relationship between oil price uncertainty and the level of economic activity, using quarterly Canadian data over the period from 1974:1 to 2010:1. In doing so, we use a bivariate VARMA, GARCH-in-Mean, asymmetric BEKK model, as detailed in Engle and Kroner (1995), Grier et al. (2004), and Shields et al. (2005). We show that the conditional variance–covariance process underlying output growth and the change in the real price of oil exhibits significant non-diagonality and asymmetry. We also present evidence that increased uncertainty about the change in the real price of oil is associated with a lower average growth rate of real economic activity in Canada, consistent with the results in Elder and Serletis (2010, forthcoming) and Rahman and Serletis (forthcoming) for the United States and Elder and Serletis (2009) for Canada. Our results are robust to alternative measures of the price of oil, alternative measures of the level of economic activity, and alternative data frequencies.
Keywords: Crude oil; Volatility; Bivariate VARMA; GARCH-in-Mean model; Asymmetric BEKK model (search for similar items in EconPapers)
JEL-codes: E32 C32 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (19) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:2:p:603-610
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol and J. P. Weyant
More articles in Energy Economics from Elsevier
Series data maintained by Dana Niculescu ().