The relationship between oil prices, global economic policy uncertainty and financial market stress

Sayyed Mahdi Ziaei

Journal of Energy Markets

Abstract: This paper introduces two models. The first model analyzes the impacts of global economic policy uncertainty (EPU), gold prices (GPs) and three-month US Treasury bill (TB) rates on oil prices (OPs) between 1997 and 2020. The second model examines the effects of OPs and US TB rates on the Püttmann Financial Stress Indicator (FSI) between 1979 and 2016. To capture the long- and short-run relationships between independent and dependent variables, an asymmetric nonlinear autoregressive distributed lag model is employed for both models. The results indicate that the effects of the independent variables are long term only. The results confirm the significant impact of global EPU and GPs on OPs in the long run. For the second model, OPs are the determining variable to explain financial stress in both the long run and the short run. Although the negative fluctuations in OPs have a positive effect on the FSI in the short run, their impacts on the FSI turn negative in the long run. The overall results underscore how OPs are affected by uncertainty and how they influence the FSI.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ2:7867956

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