Global Economic Policy Uncertainty and Energy Prices: A Markov-Switching VAR Approach

Deniz Aytaç ()
Additional contact information
Deniz Aytaç: Hitit University, Faculty of Economics and Administrative Sciences, Department of Public Finance. Corresponding author.

Journal for Economic Forecasting, 2023, issue 3, 40-61

Abstract: Economies are under the influence of global macroeconomic variables as well as national macroeconomic variables. In this context, global economic policy uncertainties are used as an important variable. The relationship between economic uncertainties and energy prices in the literature is examined over oil prices, and natural resources such as coal and natural gas, which have a significant share in world energy consumption, are rarely discussed. In this study, the relationship between the global economic policy uncertainty index and the prices of fossil fuels coal, natural gas, and oil as natural resources has been examined with the Markov Switching VAR Model. The model used enables the analysis of uncertainty and energy prices variables, which are directly affected by the expansion and recession periods of the world economy, under different regimes. As a result of the model application, it has been concluded that there is an asymmetrical relationship between global economic policy uncertainties and oil, coal, and natural gas prices, especially during the expansion periods of the global economy, and that the 1 standard deviation shock in all energy prices is explained by the global economic policy uncertainty index by approximately 50%.

Keywords: GEPU; Oil Prices; Coal Prices; Natural Gas Prices; MS-VAR (search for similar items in EconPapers)
JEL-codes: Q3 Q47 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ipe.ro/rjef/rjef3_2023/rjef3_2023p40-61.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2023:i:3:p:40-61

Access Statistics for this article

Journal for Economic Forecasting is currently edited by Lucian Liviu Albu and Corina Saman

More articles in Journal for Economic Forecasting from Institute for Economic Forecasting Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ( this e-mail address is bad, please contact ).