The Causality between Oil price, Financial Market Uncertainty and Economic Policy Uncertainty in the United States

Saimanish Prabhakar () and Athanasia Stylianou Kalaitzi ()
Additional contact information
Saimanish Prabhakar: Middlesex University Dubai, Dubai, UAE.
Athanasia Stylianou Kalaitzi: Middlesex University Dubai, Dubai, UAE.

International Journal of Energy Economics and Policy, 2026, vol. 16, issue 2, 1327-1336

Abstract: This study investigates the causal relationships between uncertainty measures and oil price dynamics, using monthly data over the period from February 1990 to September 2024. The autoregressive distributed lag model (ARDL) bound test is applied to examine the existence of a long-run relationship between the variables, while the Granger causality test in a Vector Autoregressive (VAR) framework is conducted to examine the direction of the short-run causality. To investigate the long-run causal relationships between uncertainty and oil prices, the Toda and Yamamoto test in an Augmented VAR (AVAR) is performed. The empirical results reveal no long-run cointegration among the variables. In the short run, there is a unidirectional causality from oil prices to economic policy uncertainty, while financial market uncertainty directly causes oil price movements. Additionally, both uncertainty measures indirectly cause oil prices through oil demand. The long-run causality results indicate a bidirectional causality between oil prices and economic policy uncertainty, while a unidirectional causality runs from financial market to oil prices. In addition, oil supply and financial market uncertainty indirectly cause oil prices through economic policy uncertainty. Unlike the short-run findings, the long-run results suggest that uncertainty does not cause oil prices through the demand channel.

Keywords: Economic policy uncertainty; Financial Market Uncertainty; Oil price; Vector Autoregressive (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://econjournals.com/index.php/ijeep/article/download/22952/9974 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:v:16:y:2026:i:2:id:22952

Ordering information: This journal article can be ordered from
https://econjournals.com/index.php/ijeep

DOI: 10.32479/ijeep.22952

Access Statistics for this article

More articles in International Journal of Energy Economics and Policy from International Journal of Energy Economics and Policy
Bibliographic data for series maintained by Monica Sinhat ().