Uncertainty-dependent and sign-dependent effects of oil market shocks

Bao H. Nguyen, Tatsuyoshi Okimoto, Trung Duc Tran

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

This paper investigates the uncertainty-dependent and sign-dependent effects of the oil market fundamental shocks, namely supply, aggregate demand and oil-specific demand shocks. We do so by first proposing a novel oil uncertainty index that is measured by the stochastic volatility of the unpredictable component of oil prices. We then employ a nonlinear model and find that the all reactions of oil production, real price of oil, and global economic activity to the structural shocks are regime-dependent. Moreover, we extend the model to accommodate positive and negative oil market shocks to examine the possible asymmetric effects. In relation to real economic activity, the effects of oil supply shocks are asymmetric regardless of the state of the market, but oil-specific demand shocks are only asymmetric when oil price uncertainty is high.

Original languageEnglish
Article number100207
JournalJournal of Commodity Markets
Volume26
DOIs
Publication statusPublished - 2022 Jun
Externally publishedYes

Keywords

  • Asymmetric effect
  • Oil price shock
  • Oil price uncertainty
  • Real economic activity
  • STVAR model

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Uncertainty-dependent and sign-dependent effects of oil market shocks'. Together they form a unique fingerprint.

Cite this