The dark side of the black gold shock onto Europe: One stock's joy is another stock's sorrow

Olfa Kaabia, Ilyes Abid and Farid Mkaouar

Economic Modelling, 2016, vol. 58, issue C, 642-654

Abstract: This paper examines the impact of the current oil prices fall on Europe. We estimate a Bayesian shrinkage VAR model and analyse the impulse response functions to investigate the reaction of European stock markets to the current oil prices collapse. Using data covering the March 2002 to May 2014 period, our main result is that European stock markets are negatively and significantly affected by the crude oil shock. We prove that this result is robust to reasonable changes in the Bayesian shrinkage VAR model of the variables order and inclusion of additional variables. The findings shed light that common features exist among the European stock markets. Furthermore, the results highlight that the most exposed stock market is the French one, and that the least affected market is the Austrian one.

Keywords: Oil prices shock; European stock markets; Transmission effects; Impulse responses; Bayesian analysis; VAR model (search for similar items in EconPapers)
JEL-codes: C32 E17 F44 Q43 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:642-654

DOI: 10.1016/j.econmod.2016.04.001

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