 Oil price uncertainty and the business cycle: Accounting for the influences of global supply and demand within a VAR GARCH-in-mean frameworkApplied Economics, 2018, vol. 50, issue 34-35, 3735-3751 Abstract: This article reinvestigates the influence of oil price uncertainty on real economic activity in the United States using a four-variable VAR GARCH-in-mean asymmetric BEKK model. In contrast to previous studies in this area, the analysis focuses on business cycle fluctuations and we control for global supply and demand factors that might affect the real price of oil, its volatility as well as the US economy. We find that – even after accounting for these factors – oil price uncertainty still has a highly significant negative influence on the US business cycle. Our computations show that the effect is economically important during several periods, mostly after a significant variance shift in the mid-1980s. We simultaneously estimate the effect on the global business cycle but find that it is comparatively weak. Finally, significant spillover effects in the GARCH model suggest that oil price volatility is a gauge and channel of transmission of more general macroeconomic shocks and uncertainty. These linkages are particularly strong in case of unexpected bad news. Date: 2018 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:34-35:p:3735-3751 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2018.1436142 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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