 Interactions between oil and financial markets — Do conditions of financial stress matter?Jer-Yuh Wan and Chung-Wei Kao Energy Economics, 2015, vol. 52, issue PA, 160-175 Abstract: This study uses a structural threshold VAR model to study the nonlinear relationships between oil and financial variables. The threshold effect is robust across models having different structural orderings of shocks. Evidence shows that shocks associated with different financial stress regimes explain the asymmetric responses of the system. Shocks in the stressed regime usually have larger and longer effects than shocks in the normal regime. The inverse relationship between real interest rate and real oil price is conditioned on a number of factors, and is not robust across all manner of circumstances. The relationship between oil price and the US dollar is shock-dependent. A negative shock that depreciates the dollar may trigger an increase in oil price, yet a positive oil shock may lead to appreciation of the dollar. Finally, oil's ability to hedge against rising risk is limited to a market with normal stress conditions. It is the US dollar that generally serves as a safe haven when financial markets are enmeshed in considerable tension. Keywords: Oil price; Interest rates; Exchange rates; Financial stress; Threshold VAR (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:52:y:2015:i:pa:p:160-175 DOI: 10.1016/j.eneco.2015.10.003 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.