Oil Price Shocks and Uncertainty: How stable is their relationship over time?

Stavros Degiannakis, George Filis and Sofia Panagiotakopoulou

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the time-varying relationship between economic/financial uncertainty and oil price shocks in the US. A structural VAR (SVAR) model and a time-varying parameter VAR (TVP-VAR) model are estimated, using six indicators that reflect economic and financial uncertainty. The findings of the study reveal that static frameworks (SVAR) do not show the full dynamics of the oil price shocks effects to the US economic/financial uncertainty. This is owing to the evidence provided by the time-varying framework (TVP-VAR), which convincingly shows that uncertainty responses to the three oil price shocks are heterogeneous both over time and over the different oil price shocks. In particular, uncertainty responses seem to experience a shift in the post global financial crisis period. Thus, the conventional findings that economic fundamentals response marginally, positively or negatively to supply-side, aggregate demand and oil specific demand shocks, respectively, do not necessarily hold at all periods. Rather, they are impacted by the prevailing economic conditions at each time period. The findings are important to policy makers and investors, as they provide new insights on the said relationships.

Keywords: Economic policy uncertainty; financial uncertainty; realized volatility; oil price shock; SVAR; TVP-VAR; US. (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 Q40 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (76)

Published in Economic Modelling 72 (2018): pp. 42-53

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Related works:
Journal Article: Oil price shocks and uncertainty: How stable is their relationship over time? (2018)
Working Paper: Oil Price Shocks and Uncertainty: How stable is their relationship over time? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:96271

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