Does State Dependence Matter in Relation to Oil Price Shocks on Global Economic Conditions ?

Gilles Dufrénot, William Ginn, Marc Pourroy and Adam Sullivan
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Gilles Dufrénot: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, IEP Aix-en-Provence - Sciences Po Aix - Institut d'études politiques d'Aix-en-Provence
William Ginn: LabCorp
Adam Sullivan: LabCorp

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Abstract: A common thread in the literature shows that an oil price shock can have a major impact on global economic conditions. We examine the global dimensions of changes to the global oil price and world economic uncertainty using three model types: ordinary least square (OLS); general additive model (GAM); and non-linear vector autoregression (VAR) model with local projections (LP). Our study highlights a positive and statistically significant effect of oil prices on economic uncertainty during non-expansionary periods, yet the impact is negative on economic uncertainty during periods of economic growth. Using a VAR-LP we analyze the global dimensions of a world oil price shock on global economic conditions and investigate whether there is consistency in how an oil price shock influences economic growth, consumer prices and economic uncertainty based on the state of economic conditions. The empirical evidence shows that during an expansionary (a non-expansionary) period, the impact of an oil price shock lowers (elevates) economic uncertainty. The empirical evidence from the three model types taken together indicate a presence of state dependence on the influence of an oil price shock.

Keywords: Oil Prices; Business Cycles; World Economic Uncertainty (search for similar items in EconPapers)
Date: 2024-04-10
Note: View the original document on HAL open archive server: https://hal.science/hal-04678758v1
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Published in Studies in Nonlinear Dynamics and Econometrics, 2024, ⟨10.1515/snde-2023-0018⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04678758

DOI: 10.1515/snde-2023-0018

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