Common and Country-Specific Uncertainty Fluctuations in Major Oil-Producing Countries: A Comparative Study

Refk Selmi, Jamal Bouoiyour () and Shawkat Hammoudeh ()
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Shawkat Hammoudeh: Drexel University, USA , Institute of Business Research, University of Economics, Vietnam

Journal of Economic Integration, 2020, vol. 35, issue 4, 724-750

Abstract: In the wake of recent political developments worldwide, future oil supply prospects have become doubtful and uncertainty plays a non-negligible role in determining the dynamics of major macroeconomic variables. This study constructs a factor model with time-varying loadings to decompose the variance of important macroeconomic and financial series for the top 10 oil-producing countries into the contributions from country-specific uncertainty and common uncertainty. The relative importance of the uncertainty estimates in explaining volatility in production, investment, total exports, the exchange rate, and stock prices seems to vary over time, with evidence of alternating periods of high and low persistent uncertainty. Global uncertainty plays a primary role output growth, investment, exports, and stock prices in all countries. Globalization and trade openness contribute to amplifying the international transmission of volatility, explaining the increasing importance of the global uncertainty factor.

Keywords: Common uncertainty; country-specific uncertainty; top 10oil-producing countries; dynamic factor model (search for similar items in EconPapers)
JEL-codes: C15 C32 E32 G11 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0815

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