The oil price-macroeconomy dependence

Apostolos Serletis and Libo Xu ()
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Libo Xu: Lakehead University

Empirical Economics, 2023, vol. 65, issue 6, No 1, 2520 pages

Abstract: Abstract This paper investigates the relationship between the price of oil and real output in the United States in the context of a Markov regime switching, identified, structural GARCH-in-Mean VAR model with copulas. We use the copula method to investigate the nonlinear dependence structure, as well as (upper and lower) tail dependence, between the price of oil and real output growth, and Markov regime switching to account for changing oil price dynamics over the sample period. We find an asymmetric negative dependence structure between oil price and output growth shocks and that oil price uncertainty has a negative and statistically significant effect on real output growth.

Keywords: Oil price uncertainty; Markov regime-switching; Dependence; Copulae (search for similar items in EconPapers)
JEL-codes: C32 E32 G31 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s00181-023-02432-8

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