Oil Market Shocks and Financial Instability in Asian Countries
Leila Dagher and
MPRA Paper from University Library of Munich, Germany
This paper examines the relationship between oil market shocks and financial instability in Asian countries using a Structural Vector Autoregression (SVAR) following Kilian’s (2009) methodology. Instability in the Asian financial markets is measured by the Financial Stress Index (FSI). Based on impulse response functions, the findings confirm that the source of an oil price shock (supply side or demand side) is extremely important to financial markets. When the oil price increases as a result of oil-specific demand shocks, the financial markets experience less stress. However, when the oil price increases as a result of oil-specific supply shocks, the financial markets experience increased stress. The findings of the study should be useful for international and domestic investors for portfolio diversification and other investment-production purposes, as well as for financial stability regulators and other monetary authorities.
Keywords: FSI; oil price; oil supply; Asian countries; SVAR; impulse response functions (search for similar items in EconPapers)
JEL-codes: E44 G01 G18 Q43 (search for similar items in EconPapers)
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Journal Article: Oil market shocks and financial instability in Asian countries (2023)
Working Paper: Oil Market Shocks and Financial Instability in Asian Countries (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116079
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