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Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty

Antonakakis, Nikolaos and Chatziantoniou, Ioannis and Filis, George (2014) Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty. Department of Economics Working Paper Series, 166. WU Vienna University of Economics and Business, Vienna.

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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. (authors' abstract)

Item Type: Paper
Keywords: Policy uncertainty / Oil price shock / Spillover index / Structural Vector Autoregression / Variance Decomposition / Impulse Response Function
Classification Codes: JEL C32, C51, E31, E60, Q41, Q43, Q48
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 11 Feb 2014 09:31
Last Modified: 29 Nov 2014 16:52
URI: http://epub.wu.ac.at/id/eprint/4082

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