Dynamic effects of crude oil price shocks on stock markets and exchange rates: evidence from major oil importing countries amid Russia-Ukraine conflict

Bhaskar Bagchi, Biswajit Paul and Raktim Ghosh

Global Business and Economics Review, 2024, vol. 30, issue 2, 234-257

Abstract: The recent Russia-Ukraine conflict is having a serious impact on global economic conditions. In this context, the present paper attempts to study specifically the effects of the steep surge in crude oil prices on stock market indices and real effective exchange rates (REER) of the major five crude oil importing (in terms of net imports) countries namely People's Republic of China, India, Japan, Republic of Korea, and Germany. The paper applies the DCC - MGARCH (1, 1) model based on daily data to capture the effect of the Brent crude oil price shock that uses a linear combination of the univariate GARCH model with time-varying cross equation weights to model the conditional covariance matrix of the error terms. The result of the study reveals that there is a noteworthy short-run (DCCα1) and long-run (DCCβ1) volatility spillover effects running from Brent crude oil price to all the stock market indices along with REERs.

Keywords: crude oil price; real effective exchange rate; REER; stock return; DCC-MGARCH; Russia; Ukraine. (search for similar items in EconPapers)
Date: 2024
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