Measuring the frequency and quantile connectedness between policy categories and global oil price

Huifu Nong and Hongxiao Liu

Resources Policy, 2023, vol. 83, issue C

Abstract: This study explores the connectedness between various categories of economic policy uncertainty (EPU) and global crude oil prices in different frequencies and quantiles using the generalized forecast error variance decomposition and data in the US, China, and Japan from January 2000 to May 2022. The empirical results may be summarized as follows. First, total short and long term connectedness exhibits different patterns and is more sensitive to extreme positive and negative shocks than regular shocks. Second, fiscal policy uncertainty (FPU) and monetary policy uncertainty (MPU) tend to act as net transmitters of shocks, while the roles of trade policy uncertainty (TPU) are mixed in the short term, irrespective of the country. However, under extreme market conditions, no specific-category EPU features a clear net transmitter/recipient. Finally, the results are qualitatively and quantitatively unaffected by the chosen proxy of crude oil prices and are not altered by global real economic activity.

Keywords: Quantile connectedness; Frequency connectedness; Economic policy uncertainty; Crude oil price; COVID-19 pandemic (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:83:y:2023:i:c:s0301420723002763

DOI: 10.1016/j.resourpol.2023.103565

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