How Do Energy Market Shocks Affect Economic Activity in the US Under Changing Financial Conditions?
Ojonugwa Usman and
David Roubaud ()
Additional contact information
David Roubaud: Montpellier Business School
Chapter Chapter 4 in Applications in Energy Finance, 2022, pp 85-114 from Springer
Abstract Credit markets play a crucial role in the propagation of shocks through an economy. Both economic uncertainty and oil market shocks transmit through credit markets to various sectors of an economy. However, the transmission of the shocks depends on the state of an economy as crises periods behave quite differently from normal times. We use a nonlinear vector autoregressive (VAR) model to study the transmission of uncertainty and oil market shocks using monthly data over the 1986:M1–2021:M1 period. The nonlinear VAR model allows the transmission of uncertainty and oil market shocks to a change during financial distress periods. We find that economic uncertainty is closely related to financial conditions and transmission dynamic change during financial crises. Uncertainty shocks are recessionary with a stronger effect during financial distress. Oil supply shocks associated with increasing oil prices are also recessionary and stronger during financial distress while positive demand shocks are expansionary. We find strong asymmetry in responses of macroeconomic aggregates across financial regimes and signs of the shocks.
Keywords: Oil prices; Economic activity; Uncertainty; Stochastic volatility; Financial markets; Threshold VARs (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 G01 Q41 Q43 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-92957-2_4
Ordering information: This item can be ordered from
Access Statistics for this chapter
More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().