Oil Price Shocks and Uncertainty: How stable is their relationship over time?

Stavros Degiannakis, George Filis and Sofia Panagiotakopoulou
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Sofia Panagiotakopoulou: Department of Economics and Regional Development, Panteion University of Social and Political Sciences

No BAFES13, BAFES Working Papers from Department of Accounting, Finance & Economic, Bournemouth University

Abstract: This paper investigates the time-varying relationship between economic/financial uncertainty and oil price shocks in the US. A structural VAR (SVAR) model and a time-varying parameter VAR (TVP-VAR) model are estimated, using six indicators that reflect economic and financial uncertainty. The findings from the SVAR model reveal that uncertainty indicators do not respond to supply-side oil shocks, whereas they respond negatively to aggregate demand and oil specific demand shocks. However, the TVP-VAR model shows that the uncertainty responses to the three oil price shocks are heterogeneous both over time and over the different oil price shocks. More specifically, we show that the behaviour of responses changes in the post global financial crisis period, suggesting a shift in the relationship between oil shocks and uncertainty indicators. The findings are important to policy makers and investors, as they provide new insights on the said relationship.

Keywords: Economic policy uncertainty; financial uncertainty; realized volatility; oil price shock; SVAR; TVP-VAR; US (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 Q40 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2018-02
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (82)

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Related works:
Journal Article: Oil price shocks and uncertainty: How stable is their relationship over time? (2018)
Working Paper: Oil Price Shocks and Uncertainty: How stable is their relationship over time? (2018)
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