Oil Price Uncertainty in a Small Open Economy

Başkaya, Yusuf Soner; Hulagu, Timur; Küçük, Hande

doi:10.1057/imfer.2013.5

Cited by 30 publications

(17 citation statements)

References 32 publications

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“…Similarly, while higher oil prices may lead to putting off consumption of durable goods and investment in capital goods as in Pindyck (1991), the reasons for delaying spending in these goods are minimized if the economy is growing steadily. Meanwhile, the heightened uncertainty associated with positive oil price shocks that leads to precautionary savings Kilian, 2007, 2009) or amplication of financial channels (Baskaya et al, 2013;Plante and Traum, 2014) may be lessened (or its costs downplayed) in periods of high economic growth. Finally, to the extent that inflation increases more rapidly when resources are fully utilized, monetary authorities that respond more strongly to deviations of inflation above long-run inflation targets (Herrera and Pesavento, 2009;Kilian and Vigfusson, 2011a;Yellen, 2012) could attenuate the negative effects of higher oil prices in periods of high economic growth.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

Donayre

Wilmot

2015

SSRN Journal

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A threshold vector autoregression (TVAR) is estimated to study the effects of oil price shocks on Canadian output and price level. While much of the literature has investigated potential asymmetric effects of positive and negative oil price shocks within a linear vector autoregression (VAR), we do so within a nonlinear VAR. Further, we extend the analysis to consider the correlation between asymmetries associated with the business cycle phase and size/sign asymmetries. Positive oil price shocks are found to have a stronger effect on output than negative oil price shocks. This asymmetry is significant in recessions, but lessened during expansions. The results also suggest that the reduction in inflation due to a negative oil price shock is larger than the increase in inflation following a positive oil price shock, especially during periods of low output growth. Yet, neither inflation nor output growth seems to vary disproportionately with the size of the oil price shock. In general, the results are robust to the ordering of the variables in the VAR process and to the time window over which the net oil price change is computed.

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Section: Discussion Of Resultsmentioning

confidence: 99%

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

Donayre

Wilmot

2015

SSRN Journal

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“…Stakeholders in oil markets are generally interested in how the volatility and oil price shocks are transmitted to stock market prices. Uncertainty is presented as an essential channel through which changes in oil prices can be transmitted to the key sectors of an economy, including the real sector and the financial sector (Başkaya et al 2013, Aye 2015, Caporale et al 2015, and Cũnado et al 2015. In this vein, the stock market prices depend on the expected cash flows discounted by the required rate of returns (Williams 1938), which are substantially sensitive to any factor that could alter the expected cash flows or the required rate of returns (Filis et al 2011).…”

Section: Literature Reviewmentioning

confidence: 99%

The Asymmetric Responses of Stock Markets

Dhaoui

Goutte

Guesmi

2018

Journal of Economic Integration

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This paper investigates how oil price shocks interact with oil-importing and oil-exporting stock markets within a nonlinear autoregressive distributed lag framework. By defining oil prices as endogenous variables, this model allows us to gage the shock transmission among the system variables and consider the asymmetric long-and short-run effects. Our empirical findings show an asymmetric long-run relation between stock market prices and macroeconomic fundamentals. These results suggest that investors should adjust their investment strategies to changes in oil prices and consider the asymmetry when forecasting and managing the negative impacts of unexpected events.

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“…The main body of this paper belongs to the broad literature which has investigated the role of uncertainty shock in an open economy context. 3 The paper shares some similarities with Başkaya et al (2013), Born and Pfeifer (2014), ), Fernández-Villaverde et al (2011), Garcıa Cicco et al (2013, Gómez-González et al (2013) and Pfeifer et al (2012). Among many differences, this paper has two key distinctions with respect to these works, namely, (i) the nature by which an uncertainty shock is captured in the structural DSGE model; and…”

Section: Introductionmentioning

confidence: 58%

The Macroeconomic Effects of Commodity Price Uncertainty

Tran

2021

SSRN Journal

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This paper studies the macroeconomic effects of commodity price uncertainty (CPU) shocks. Using Australia as a case study, an econometric-based CPU index is proposed to reveal that Australia has experienced an unprecedented increase in uncertainty from the commodity market recently. Evidence from a VAR model shows that CPU shocks have a larger recessionary impact than other relevant uncertainty shocks such as financial, economic and trade policy uncertainty. The empirical results are then interpreted in a non-linear multisector DSGE model of the Australian economy by estimating key parameters in the DSGE model to match its responses to the VAR responses. CPU shocks in the DSGE model, via foreign commodity export demand with price rigidity, trigger a precautionary response and cause a decline in real economic activity.

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Oil Price Uncertainty in a Small Open Economy

Cited by 30 publications

References 32 publications

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

The Asymmetric Effects of Oil Price Shocks on the Canadian Economy

The Asymmetric Responses of Stock Markets

The Macroeconomic Effects of Commodity Price Uncertainty

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