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The Impacts of Structural Oil Shocks on Macroeconomic Uncertainty: Evidence from a Large Panel of 45 Countries

Xin Sheng, Rangan Gupta () and Qiang Ji
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Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, CM1 1SQ, United Kingdom
Qiang Ji: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China

No 202024, Working Papers from University of Pretoria, Department of Economics

Abstract: Using local projection methods, this paper employs monthly panel data from 1989 to 2017 to examine both linear and nonlinear impulse responses of macroeconomic uncertainty to structural shocks to global oil production, aggregate demand, oil-market-specific demand and speculative demand in a large group of 45 economies. We find that both oil supply and demand shocks are important drivers of uncertainty. There is strong evidence that the impacts of oil price shocks on macroeconomic uncertainty are regime-dependent and contingent on the states of investor sentiments and perceived volatility in financial markets. The responses of economic uncertainty to oil shocks, especially demand-side shocks, appear to experience a dramatic change in the post-Global Financial Crisis period.

Keywords: Oil shocks; uncertainty; local projections; regime-dependent (search for similar items in EconPapers)
JEL-codes: C22 Q02 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2020-03
New Economics Papers: this item is included in nep-ene
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