Relationships among geopolitical risk, trade policy uncertainty, and crude oil import prices: Evidence from China

Yuegang Song, Xiaoyu Zhang and Guoheng Hu

Resources Policy, 2023, vol. 82, issue C

Abstract: This study is the first to take the crude oil import price of a specific country and the detailed economic policy uncertainty index as an example to analyze the nonlinear time-varying and asymmetric effects between geopolitical risk, trade policy uncertainty, and the crude oil import price using the Time Varying Parameter-Stochastic Volatility-Vector Auto Regression(TVP-SV-VAR) model and the variance decomposition method. Three main conclusions were drawn. First, there is a significantly asymmetrical two-way spillover effect between geopolitical risk and trade policy uncertainty, significantly affecting the crude oil import price in the short term. Recently, the effect's direction and intensity have changed. The crude oil import prices depend more on the effect of geopolitical risk than that of trade policy uncertainty. Second, the impulse response to shock is remarkably volatile at different times. The volatility gradually tends to stability. At different times, the variables differ in response to other variables, the direction of response, and the time needed to resume the steady state. Third, the variables in the system fairly interact with each other. The shock of a variable contributes significantly to its volatility and increases as the length of the prediction period grows. This shock contributes less significantly to the volatility of other variables and decreases as the length of the prediction period grows. The conclusions are significant for national energy security and stable economic growth.

Keywords: TVP-SV-VAR; Variance decomposition; Geopolitical risk; Trade policy uncertainty; Crude oil import prices (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:82:y:2023:i:c:s0301420723002660

DOI: 10.1016/j.resourpol.2023.103555

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