Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty
() and Ioannis Chatziantoniou
Abstract: This study examines the dynamic relationship between
changes in oil prices and the economic policy uncertainty index for a
sample of both net oil-exporting and net oil-importing countries over the
period 1997:01-2013:06. To achieve that, we extend the Diebold and Yilmaz
(2009, 2012) dynamic spillover index using structural decomposition. The
results reveal that economic policy uncertainty (oil price shocks) responds
negatively to aggregate demand oil price shocks (economic policy
uncertainty shocks). Furthermore, during the Great Recession of 2007-2009,
total spillovers increase considerably, reaching unprecedented heights.
Moreover, in net terms, economic policy uncertainty becomes the dominant
transmitter of shocks between 1997 and 2009, while in the post-2009 period
there is a significant role for supply-side and oil specific demand shocks,
as net transmitters of spillover effects. These results are important for
policy makers, as well as, investors interested in the oil market.
JEL-Codes: C32,; C51,; E31,; E60,; Q41,; Q43,; Q48; (follow links to similar papers)
PDF Document Keywords: Policy uncertainty, Oil price shock, Spillover index, Structural Vector Autoregression, Variance Decomposition, Impulse Response Function
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