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Oil Price Uncertainty
TLDR
This article used multivariate volatility models to investigate the relationship between the price of oil and the level of economic activity, focusing on the role of uncertainty about oil prices, using a fully specified multivariate framework, based on both structural and reduced form VARs that are modified to accommodate GARCH-in-Mean errors.Abstract:
The relationship between the price of oil and the level of economic activity is a fundamental issue in macroeconomics. There is an ongoing debate in the literature about whether positive oil price shocks cause recessions in the United States (and other oil-importing countries), and although there exists a vast empirical literature that investigates the effects of oil price shocks, there are relatively few studies that investigate the direct effects of uncertainty about oil prices on the real economy. The book uses recent advances in macroeconomics and financial economics to investigate the effects of oil price shocks and uncertainty about the price of oil on the level of economic activity. Contents: Introduction Univariate Volatility Models Multivariate Volatility Models Oil Price Uncertainty The Asymmetric Effects of Oil Price Shocks Evidence from Canada Readership: Scholars & industry professionals interested in the effects of oil pricing. Key Features: The book uses multivariate volatility models to investigate the relationship between the price of oil and the level of economic activity, focusing on the role of uncertainty about oil prices It uses a fully specified multivariate framework, based on both structural and reduced form VARs that are modified to accommodate GARCH-in-Mean errors It investigates the robustness of the results to i) alternative measures of the price of oil, ii) alternative measures of the level of economic activity, and iii) alternative data frequencies and model specificationsread more
Citations
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Oil returns and volatility: The role of mergers and acquisitions
TL;DR: In this paper, the authors examined the predictive power of mergers and acquisitions over WTI oil returns and volatility using a nonparametric quantile-based methodology and found that M&A activity carries significant predictive power over oil return and volatility, while predictability displays remarkably distinct patterns across various quantiles representing normal, bull and bear market states.
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Oil and the economy: A cross bicorrelation perspective☆
TL;DR: This article used a cross-bicorrelation test to study the relationship between the real price of oil and industrial production in the United States and found evidence of nonlinearity, for different window frames, over the period from February 1974 to May 2013.
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The Zero Lower Bound and Endogenous Uncertainty
TL;DR: In this paper, the authors examined the correlation between uncertainty and real GDP growth and found that the zero lower bound on the federal funds rate contributed to the negative correlation between the two variables.
Posted Content
Dynamic Spillovers of Oil Price Shocks and Policy Uncertainty
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 signicant role for supply{side and oil specic demand shocks, as net transmitters of spillover eects. These results are important for policy makers, as well as, investors
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Asymmetric effects of oil shocks on stock market returns in Saudi Arabia: evidence from industry level analysis
TL;DR: This article examined the impact of oil price shocks on stock market returns in Saudi Arabia using the country-level as well as the industry-level stock market data and found that the relation between changes in oil prices and equity returns is positive and significant at the country level and at the industry level.
References
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Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation
TL;DR: In this article, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) processes are introduced, which are mean zero, serially uncorrelated processes with nonconstant variances conditional on the past, but constant unconditional variances.
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Oil and the Macroeconomy since World War II
TL;DR: The authors found that all but one of the U.S. recessions since World War II have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum.
Posted Content
Not All Oil Price Shocks are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market
Lutz Kilian,Lutz Kilian +1 more
TL;DR: In this paper, a structural decomposition of the real price of crude oil in four components is proposed: oil supply shocks driven by political events in OPEC countries; other oil supply shock; aggregate shocks to the demand for industrial commodities; and demand shocks that are specific to the crude oil market.
Journal ArticleDOI
Evaluating Natural Resource Investments
TL;DR: In this article, it is shown that continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing, managing, and abandoning them.
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