The Impact of Uncertainties on Crude Oil Prices: Based on a Quantile-on-Quantile Method

Yan Ding, Yue Liu and Pierre Failler
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Yan Ding: Business School, Hunan Institute of Technology, Hengyang 421200, China
Yue Liu: Business School, Hunan Institute of Technology, Hengyang 421200, China
Pierre Failler: Economics and Finance Group, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK

Energies, 2022, vol. 15, issue 10, 1-35

Abstract: There has always been a complex relationship between uncertainty and crude oil prices. Three types of uncertainty, i.e., economic policy uncertainty, geopolitical risk uncertainty, and climate policy uncertainty (EPU, GPR, and CPU for short), have exacerbated abnormal fluctuations in the energy market, making crude oil prices volatile more and more frequently, especially from the perspective of the financial attribute of crude oil. Based on the time-series data related to uncertainties and crude oil prices from December 2001 to March 2021, this paper uses the quantile-on-quantile regression (QQR) method to explore the overall impact of various uncertainties on crude oil prices. Moreover, this paper adopts the QQR method based on the wavelet transform to investigate the heterogeneous effects of various uncertainties on crude oil prices at different time scales. The following conclusions are obtained. First, there are significant differences in the overall impact of the three types of uncertainties on crude oil prices, and this heterogeneity is reflected in quantiles of the peak impact intensity, the impact direction, and the fluctuation change. Second, the impact intensities of the three types of uncertainties on crude oil prices are significantly different at different time scales. This is mainly reflected in the different periods of significant impact of the three uncertainties on crude oil prices. Third, the impact directions and fluctuations of the three types of uncertainties on crude oil prices are heterogeneous at different time scales.

Keywords: economic policy uncertainty; geopolitical risk uncertainty; climate policy uncertainty; crude oil price; wavelet transform; quantile-on-quantile regression (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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