Economics at your fingertips  

On the pernicious effects of oil price uncertainty on US real economic activities

Amélie Charles (), Chew Lian Chua (), Olivier Darné and Sandy Suardi ()
Additional contact information
Amélie Charles: Audencia Business School
Chew Lian Chua: University of Nottingham Ningbo, China

Empirical Economics, 2020, vol. 59, issue 6, No 5, 2689-2715

Abstract: Abstract The last five decades have witnessed dramatic changes in crude oil price dynamics. We identify the influence of extreme oil shocks and changing oil price uncertainty dynamics associated with economic and political events. Neglecting these features of the data can lead to model misspecification that gives rise to: firstly, an explosive volatility process for oil price uncertainty, and secondly, erroneous output growth dynamic responses to oil shocks. Unlike past studies, our results show that the sharp increase in oil price uncertainty after mid-1985 has a pernicious effect on output growth. There is evidence that output growth responds symmetrically (asymmetrically) to positive and negative shocks in the period when oil price uncertainty is lower (higher) and more (less) persistent before (after) mid-1985. These results highlight the importance of accounting for outliers and volatility breaks in oil price and output growth and the need to better understand the response of economic activity to oil shocks in the presence of oil price uncertainty. Our results remain qualitatively unchanged with the use of real oil price.

Keywords: Oil price uncertainty; Impulse response; Volatility breaks; Outliers (search for similar items in EconPapers)
JEL-codes: G10 C32 E32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: On the Pernicious Effects of Oil Price Uncertainty on U.S. Real Economic Activities (2020) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-019-01801-6

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2021-04-12
Handle: RePEc:spr:empeco:v:59:y:2020:i:6:d:10.1007_s00181-019-01801-6