The impact of macro economy on the oil price volatility from the perspective of mixing frequency

Xu Gong, Mingchao Wang and Liuguo Shao

International Journal of Finance & Economics, 2022, vol. 27, issue 4, 4487-4514

Abstract: In this paper, GARCH‐MIDAS model is used to study the influence of macro economy, including the levels and volatilities of macroeconomic variables, on the price fluctuations of crude oil market during the period from 1990 to 2018. The results indicate that, for the levels of macroeconomic variables, economic growth, inflation and total export–import volume have significant negative impacts on oil fluctuations. However, exchange rate has a significant positive impact on oil volatility. And short‐run interest rate does not have a significant effect on oil price volatility in most cases. In addition, the responses of oil price volatility to all five macroeconomic fluctuations are significant. More interestingly, the volatilities of economic growth and total import and export reduce oil price fluctuations during the pre‐2004 period, but they increase oil price fluctuations during the post‐2004 period.

Date: 2022
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