Systemic risk and economic policy uncertainty: International evidence from the crude oil market

Lu Yang and Shigeyuki Hamori

Economic Analysis and Policy, 2021, vol. 69, issue C, 142-158

Abstract: The causal relationship between systemic risk and global economic policy uncertainty remains unexplored, even though the latter serves as an important factor in asset pricing and macroeconomic forecasting. This study extends Adrian and Brunnermeier’s (2016) framework, combining it with mixed data sampling (MIDAS) to calculate the systemic risk in the crude oil market based on monthly frequencies. We employ Diebold and Yilmaz’s (2009, 2014) connectedness measures to identify the causal relationship between systemic risk in the crude oil market and global economic policy uncertainty. We find that global economic policy uncertainty is economically significant in determining systemic risk, although its role weakens during financial crises. In other words, less disagreement in economic policies may decrease systemic risk. Therefore, both policymakers and financial practitioners should be aware of the causality changes and increasing connectedness within the system and make decisions accordingly.

Keywords: Economic policy uncertainty; Systemic risk; Crude oil; Connectedness; Causality (search for similar items in EconPapers)
JEL-codes: G10 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592620304483
Full text for ScienceDirect subscribers only

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:eee:ecanpo:v:69:y:2021:i:c:p:142-158

DOI: 10.1016/j.eap.2020.12.001

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().