Oil shocks and directional predictability of macroeconomic uncertainties of developed economies: Evidence from high‐frequency data†

Syed Jawad Hussain Shahzad, Rangan Gupta, Riza Demirer and Christian Pierdzioch

Scottish Journal of Political Economy, 2022, vol. 69, issue 2, 169-185

Abstract: Using high‐frequency (daily) data on macroeconomic uncertainties and the partial cross‐quantilogram approach, we examine the directional predictability of disentangled oil‐price shocks for the entire conditional distribution of uncertainties of five advanced economies (Canada, Euro Area, Japan, the United Kingdom, and the United States). Our results show that oil‐demand, oil‐supply, and financial‐risk‐related shocks can predict the future path of uncertainty; however, the predictive relationship is contingent on the initial level of macroeconomic uncertainty and the size of the shocks. Our results suggest that macroeconomic uncertainty is indeed predictable at high frequency, and that oil‐price shocks capture valuable predictive information regarding the future path of macroeconomic uncertainties.

Date: 2022
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https://doi.org/10.1111/sjpe.12280

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