Dynamic effects and driving intermediations of oil price shocks on major economies

Interest in oil price shocks' economic effects has grown in recent years. However, previous studies mostly failed to clarify the dynamic transmissions of oil price shocks on representative economies from global and driver perspectives, even ignoring oil price fluctuations when linking oil prices and economy together. This paper examines the dynamic relationships and driving intermediations between multiple oil price shocks and macroeconomy by applying Bayesian vector autoregressive models with stochastic volatility and time-varying parameters, using the USA, China, the Euro-19, and Japan as research objects. Results show that, in the whole sample, all oil prices have the strongest effects on Japan, followed by China, Euro-19, and the USA, with possible directional differences. All oil prices' economic effects intensified during the crisis and Covid-19, accompanying significant oil price fluctuations. Regarding asymmetry, in the whole sample and critical times, stronger effects of rising oil prices show in the short term, but opposite in the long term. Consumer price, interest rate, and exchange rate are the general intermediations of oil prices in China and the USA, Euro-19, and Japan, respectively, and exchange rate is the additional intermediation in China, Euro-19, and Japan during the crisis and Covid-19. Overall, the results are solid.

The Protective Nature of Gold During Times of Oil Price Volatility: An Analysis of the COVID-19 Pandemic.

This research explores gold's safe-haven properties amid oil price instability, focusing on the COVID-19 pandemic. The study examines how gold hedges against oil price swings in the context of the pandemic's exceptional market circumstances. A VAR (Vector Autoregressive) model analyzes gold and oil prices from 2006 through 2021. The VAR model reflects the dynamic interactions and interdependencies between these two essential commodities in the context of oil price volatility and the COVID-19 pandemic. This analysis shows that gold protects against oil price volatility and the COVID-19 pandemic-gold buffers against oil price swings due to its strong inverse association with oil prices. Gold offers investors security and asset preservation during significant oil price volatility. In light of oil price volatility and the COVID-19 pandemic, the study helps explain gold's importance as a diversification tool and haven asset. Investors, policymakers, and market players should consider gold as a hedge against oil price volatility and economic instability.

Quantile connectedness between oil price shocks and exchange rates

Oil is an energy resource and a driver of global economic activities. The increasing need for oil amplifies its trade and places pressure on the current account balance, which causes exchange rate fluctuations. We transcend the mean-based connectedness measures to explore the oil shocks-exchange rates nexus from an asymmetric perspective. With daily data from 07-03–1996 to 22-08-2022, we analyse the quantile dynamic spillovers between oil price shocks and exchange rates of oil-exporting and oil-importing economies. We show that shock sizes shape the system returns and volatility connectedness, with lower-tailed and upper-tailed shocks having a greater influence on the system connectedness than shocks modelled at the conditional median. By demonstrating asymmetry, the findings emphasise that for a detailed comprehension of the oil shocks-exchange rates connectedness under extreme shocks, it is necessary to go beyond mean-based connectedness metrics. The implications of our findings are important for investors, policymakers, and practitioners.

Oil price shocks, economic policy uncertainty, and green finance: a case of China

This study investigates the long- and short-run effects of crude oil price (COP) and economic policy uncertainty (EPU) on China's green bond index (GBI) using the quantile autoregressive distributed lag model. The empirical results show that COP and EPU produce a significant positive and negative influence on GBI in the long-run across most quantiles, respectively, but their short-run counterparts are opposite direction and only significant in higher quantiles. Thus, major contributions are made accordingly and shown in the following aspects. The findings emphasise the importance of understanding how COP and EPU affect China's green bond market for the first time. In addition, both the long- and short-run effects are captured, but long-run shocks primarily drive the green bond market. Finally, time- and quantile-varying analyses are adopted to explain the nexus between COP and EPU to GBI, which considers not only different states of the bond market but also events that occur in different time periods. Some detailed policies, such as a unified and effective green bond market, an early warning mechanism of oil price fluctuation, and prudent economic policy adjustments, are beneficial for stabilising the green finance market.

Unraveling the COVID-19 Pandemic's Impact on South Korea's Macroeconomy: Unearthing Novel Transmission Channels within the Energy Sector and Production Technologies

As a consequence of the COVID-19 pandemic, Korea's economy has experienced significant setbacks. Thus, this article examines the implications of the COVID-19 pandemic on Korea's key macroeconomic indicators via the transmission channels of oil prices and production technology. Using Bayesian estimation and impulse response functions for empirical investigation, the results suggest that the COVID-19 pandemic has intensified the reduction in firm production, consumption of oil-based goods, employment, and investment. Increasingly, households rely on non-oil goods rather than oil-based ones. Similarly, the results suggest that the drop in production technology levels brought on by the COVID-19 pandemic has a stronger impact on business output and investment but a lesser influence on household employment. The COVID-19 pandemic has led to a decline in household non-oil consumption as well as household and business consumption of oil-based goods. To sum up, the existing Korean literature on this issue might be improved by including the findings offered in this article. [ FROM AUTHOR] Copyright of Energies (19961073) is the property of MDPI and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)

Volatility Spillovers between Stock and Energy Markets during Crises: A Comparative Assessment between the 2008 Global Financial Crisis and the Covid-19 Pandemic Crisis

This paper investigates volatility spillovers between energy and stock markets during periods of crises. Our main findings reveal that transmissions of volatilities among these markets during the Covid-19 pandemic crisis exceeded the ones recorded throughout the 2008 global financial crisis. All stock markets are net transmitters of volatility to energy markets during the 2008 global financial crisis while they show different patterns during the Covid-19 crisis. We also provide evidence of asymmetric volatility spillovers among stock and energy markets. Our results also indicate that on average natural gas provides better hedging effectiveness to the stock markets than crude oil.

Intra-BRICS Trade: A Panel Data Analysis with Structural Breaks

This article attempts to examine the recent developments that have amplified the consequences of uncertainty regarding trade between Brazil, Russia, India, China, and South Africa (BRICS) countries under global economic turmoil such as occurred in the 2008 financial crisis and trade wars sparked by the USA and the COVID-19 pandemic. These events severely affected intraBRICS trade and investment. For this purpose, we employed the Westerlund and Edgerton cointegration approach to check for cointegration under structural breaks and the procedure for the asymmetric Granger non-causality test to assess the causal relationship between the custom tariff and export variables of BRICS countries with regard to the panel data methodology for the 2000-2020 period using annual data. The empirical results for cointegration indicate the presence of a long-term relationship;in other words, they are seen to move together under investigation. The estimated breakpoints correspond with 2008 and the ongoing financial turmoil and with the 2018-2020 period and the rising trade disputes between USA and China. In addition, the Granger non-causality test provides enough evidence to show opposite directions (signs) for the causal links between the variables that run from tariffs to exports for BRICS countries.

The impacts of demand and supply shocks in the dry bulk shipping market

The freight rate is a representative variable in the shipping market and is characterized by a cyclical re-lationship. Even though downturns in the shipping market, such as the shipping industry recession in the 1980s, the global financial crisis in 2008 and COVID-19 crisis in 2020, recur, few studies have analyzed the dynamic relationship between supply and demand in terms of its effect on freight rates. Thus, this study classifies the factors affecting fluctuations in dry cargo freight rates into demand, supply, and freight rate specific demand factors, which play the most important role in managing risk in the shipping market. Based on the recursive structural vector autoregressive (recursive SVAR) model, we analyze the historical con-tributions of the effects of each factor across different time periods. Two main findings are summarized as follows: first, we identify the dynamic relationship between factors affecting BDI in the shipping market, and reveal that the magnitude and direction of factors are different. Second, we verify that in an extreme situation in which freight rates exceed the normal range, the market is overheated, and freight rates are therefore determined by the freight rate specific demand of market participants rather than by the actual supply and demand.(c) 2023 The Authors. Production and hosting by Elsevier B.V. on behalf of The Korean Association of Shipping and Logistics, Inc. This is an open access article under the CC BY-NC-ND license (http://creative-commons.org/licenses/by-nc-nd/4.0/).

Oil price shocks and inflation: A cross-national examination in the ASEAN5+3 countries

We test interaction between the oil price shocks and inflation in the ASEAN5+3 countries utilizing 35 years of monthly data beginning in 1987–2022. We show that when the COVID-19 pandemic is factored into our sample, oil-specific demand shocks and aggregate demand shocks had a significant impact on inflation in these countries. These findings hint that the COVID-19 pandemic is likely the fundamental cause of the inflationary impact of these shocks. The impact of rising inflation sparked by shocks emanating from oil-specific demand and aggregate demand is evident in Malaysia, Singapore, Thailand, the Philippines, and Japan. We discover evidence that inflation responds asymmetrically to oil price shocks, depending on whether the shocks are positive or negative. Our empirical findings have significant policy implications for policymakers as they provide a reasonable explanation for the ASEAN5+3 countries' inflationary responses to various oil price shocks. © 2023 Elsevier Ltd

Systemic Risk of China's Financial Industry during the Spread of the COVID-19 Epidemic and the Breakdown of Crude Oil Negotiation

This research first adopts three indicators to measure the systemic risk of different financial industries in China. Second, we employ the Time Varying Parameter-Stochastic Volatility-Vector Auto Regression (TVP-SV-VAR) model to investigate the time-varying relationship among COVID-19 epidemic, crude oil price, and financial systemic risk. The results herein not only help us grasp the current level of systematic risk in China, but also can assist at improving the early warning risk indicators and enhance the risk management system. Lastly, this research can also help investors to make reasonable asset planning.

Hidden causality between oil prices and exchange rates

This work investigates the interactions between oil prices and exchange rates of 6 typical oil importers (China, Japan, and India) and exporters (Canada, Russia, and Saudi Arabia) from 2006 to 2022. We employ a novel method to capture their causal interactions, namely pattern causality, and compare the results to that based on the volatility spillover method. The empirical analysis supports most existing findings that oil prices are bidirectional correlated with exchange rates. However, unlike previous studies that only investigate positive and negative causalities, we highlight dark causality as a more complex interaction. Moreover, dark causality suggests that successive increases (decreases) in oil prices tend to drive the exchange rates of oil exporters to act in an oscillatory manner rather than in a purely positive or opposite trend, and vice versa. Furthermore, we also reveal that dark causality shows dominance during crises, e.g., the global financial crisis, the European debt crisis, the epidemic of COVID-19, and the Russia-Ukraine conflict. Revealing three types of causalities between oil prices and exchange rates helps policymakers develop more diversified macroeconomic policies. Moreover, the newly identified dark causality can be a useful indicator for investors to risk management. © 2023

Knowledge Discovery to Support WTI Crude Oil Price Risk Management

The high volatility of commodity prices and various problems that the energy sector has to deal with in the era of COVID-19 have significantly increased the risk of oil price changes. These changes are of the main concern of companies for which oil is the main input in the production process, and therefore oil price determines the production costs. The main goal of this paper is to discover decision rules for a buyer of American WTI (West Texas Intermediate) crude oil call options. The presented research uses factors characterizing the option price, such as implied volatility and option sensitivity factors (delta, gamma, vega, and theta, known as "Greeks”). The performed analysis covers the years 2008–2022 and options with an exercise period up to three months. The decision rules are discovered using association analysis and are evaluated in terms of the three investment efficiency indicators: total payoff, average payoff, and return on investment. The results show the existence of certain ranges of the analyzed parameters for which the mentioned efficiency indicators reached particularly high values. The relationships discovered and recorded in the form of decision rules can be effectively used or adapted by practitioners to support their decisions in oil price risk management.

Measuring the frequency and quantile connectedness between policy categories and global oil price

This study explores the connectedness between various categories of economic policy uncertainty (EPU) and global crude oil prices in different frequencies and quantiles using the generalized forecast error variance decomposition and data in the US, China, and Japan from January 2000 to May 2022. The empirical results may be summarized as follows. First, total short and long term connectedness exhibits different patterns and is more sensitive to extreme positive and negative shocks than regular shocks. Second, fiscal policy uncertainty (FPU) and monetary policy uncertainty (MPU) tend to act as net transmitters of shocks, while the roles of trade policy uncertainty (TPU) are mixed in the short term, irrespective of the country. However, under extreme market conditions, no specific-category EPU features a clear net transmitter/recipient. Finally, the results are qualitatively and quantitatively unaffected by the chosen proxy of crude oil prices and are not altered by global real economic activity. © 2023 Elsevier Ltd

War build-up and stock returns: evidence from Russian and Ukrainian stock markets

PurposeThis study examined the impact of war/conflict-related news on the Russian and Ukrainian stock markets in the build-up and beginning of the war that sparked in the year 2022.Design/methodology/approachIn order to examine the impact of war-related news on stock returns, data were gathered from the United States (US) and Russian stock indices, oil price and volatile index (VIX) from Yahoo.finance;Ukrainian stock values from pfts.ua website and daily related news retrieved from nexis.com were analysed. The data were gathered from January 1, 2022 to February 24, 2022. Seeming unrealated regressions (SUR) and exponential generalised autoregressive conditional heteroscedastic (EGARCH) models were carried out to determine the formulated correlations. This study controlled the oil price, US stock returns, Chicago Board Options Exchange (CBOE) VIX and difference in stock returns of Russia and Ukraine.FindingsThe results are presented two-fold: first, war-related news between the two countries enhanced volatility and caused a significant decline in the stock market indices for both countries. Second, the Russian stock market faced a steeper decline in the build-up and the actual beginning of the war than the Ukrainian stock market. Notably, the Russian markets feared the adverse economic consequences that stemmed from the sanctions the US and the Western world imposed.Research limitations/implicationsAs this study was based on early evidence, future studies with a longer window may provide better insights. This present study is restricted to the stock returns of the countries directly involved in the build-up towards war. Studies focusing on the impact of other asset classes, currencies, commodities and global stock markets might offer holistic insights.Practical implicationsThe study outcomes suggest that global portfolio investors should stay away from stock markets of the war-raged countries and equity markets in general, but instead look for safe-haven assets.Originality/valueThe paper evaluates stock markets' performance during the pre-war period, considering the context of this historical war between the neighbours. It is important to understand this issue as this war is subject to sanctions by the US and leads to a global supply chain crisis.

Markov-Regime Switches in Oil Markets: The Fear Factor Dynamics

This paper is an attempt to examine regime switches in the empirical relation between return dynamics and implied volatility in energy markets. The time-varying properties of the return-generating process are defined as a function of several risk factors, including oil market volatility and changes in stock prices and currency rates. The empirical evidence is based on Markov-regime switching models, which have the capacity to capture, in particular, the stochastic behavior of the OVX oil volatility index as a benchmark for investors' fear. The results suggest that the dynamics of oil market returns are governed by two distinct regimes, a state driven by a negative relationship between returns and implied volatility and another state characterized by a more pronounced negative correlation. It is the latter regime with a stronger correlation that tends to prevail over the sample period from 2008 to 2021, but the frequency of regime shifts also seems to increase under more volatile oil price dynamics in association with significant events such as the COVID-19 pandemic. Thus, the evidence of a negative correlation structure is found to be robust to changes in the estimation period, which suggests that the oil volatility index remains a reliable gauge of market sentiment in the energy markets. © 2023 by the author.

The Role of Coal and Palm Oil Prices in Indonesia Stock Performance: An ARDL Approach

Indonesia is one of the main exporters of coal and palm oil, implying the source of energy in futures. However, these commodities could have a greater impact on national economy, determining stock market performance. The movement of international trade related to these commodities also contributes to pricing creation in global market. This research aims to investigate the effect of coal and palm oil prices on Indonesia stock performance by a stock market index price. The Autoregressive Distributed Lag (ARDL) was employed in this study to gain the long and short-run results. The research observations lasted between September and December 2021. The research novelty lies in exploring the impact of coal and palm oil price movements after the COVID-19 pandemic in 2020 on the Indonesia Stock Market performance. It can be concluded that these effects are short-t and long-term or both. The findings show long-and short-run effects of palm oil prices on the stock market performance. However, Coal has only a long-run effect on the stock performance. The implication of this study is the consideration of these commodities by policymakers and practitioners for policy in developing the stock market performance. The research limitations and recommendations are also discussed. © 2022, City University of Hong Kong Press. All rights reserved.

Dynamic causality between oil prices and stock market indexes in Russia and China: does US financial instability matter?

Purpose: This study aims to examine the dynamic bidirectional causality between oil price (OIL) and stock market indexes in net oil-exporting (Russia) and net oil-importing (China) countries. Design/methodology/approach: The authors use monthly data for the period starting from October 1995 to October 2021. In this study, the bootstrap rolling-window Granger causality approach introduced by Balcilar et al. (2010) and the probit regression model are performed in order to identify the bidirectional causality. Findings: The results show that the causal periods mainly occur during economic, financial and health crises. For oil-exporting country, the results suggest that any increase (decrease) in the OIL leads to an appreciation (depreciation) in the stock market index. The effect of the stock market on OIL is more relevant for the oil-importing country than that for the oil-exporting one. The COVID-19 consequences are demonstrated in the impact of oil on the Russian stock market. The probit regression shows that the US financial instabilities increase the probability of causality between OIL and stock market indexes in Russia and China. Practical implications: The dynamic relationship between the variables must be taken into account in investment decisions. As financial instabilities in the USA drive the relationship between oil and stocks, investors should consider geopolitical, economic and financial elements when constructing their portfolios. Shareholders are required to include other assets in their portfolios since oil–stock relationship is highly risky. Originality/value: This study provides further evidence of the bidirectional oil–stock causal link. Additionally, it examines the impact of financial instabilities on the probability that the OIL and the stock market index cause each other through the Granger effect. © 2023, Emerald Publishing Limited.

Pass-through Effects of Oil Prices on LATAM Emerging Stocks before and during COVID-19: An Evidence from a Wavelet-VAR Analysis

Vector Auto regression model (VAR) a time-varying parameter is applied to study the effect of oil price shocks on the returns of stocks in the LATAM (Latin American) markets. Coherent Wavelet analysis highlights possibilities of connectedness of the oil price and LATAM stock markets through the presence of different patterns in a time series. The structural demand shocks standard deviations during the COVID-19 era remain high and the pass-through effects on stock returns due to oil prices differ for different time frames. The fundamental linkages are demonstrated due to oil market specific demand. The main motive of the research work is to identify the influence of oil price on stocks and identify the fundamental source of contagion.A random effects model is applied to the panel data of LATAM markets with the Global stock market index, MSCI (Morgan Stanley Capital International World Index), domestic money market rates and currency exchange rates during the period of study, 15 March 2019 to 31 July 2021 with 684 observations of controlled non-observed characteristics from individual country. The findings of this research recommend the pass-through effect of the oil prices on the stock market returns are based on time frequency. The contribution of this paper helps the policy makers to restore the confidence amongst the investors in the stock markets and strategies to be adopted by the investors to mitigate the risk by ideal portfolio management. © 2023, Econjournals. All rights reserved.

How has Covid-19 infected the stock market and exchange rate? (A case study of infected vs. uninfected countries)

The Covid-19 pandemic has hit the stock market and exchange rates in the infected countries. By using the Difference in Difference method, the Event Study method and ordinary least square (OLS), this research has analysed the impact of Covid-19 on the stock market and exchange rate in the infected countries specified in this research. The result is a positive relationship between the cumulative new cases of Covid-19 and the exchange rate. The exchange rate depreciation in the countries infected by Covid-19 occurred after the countries announced the first case of Covid-19, except for in UK. For the countries that were not infected by Covid-19, they experienced an appreciation of the exchange rate. The price of the composite stock index decreased when the first case of Covid-19 was announced. There is a negative relationship between cumulative new cases of Covid-19 and the composite stock index prices, except for in China. The number of global cases of Covid-19 has a negative relationship with the world oil price. However, there is a positive relationship with the world gold price. Copyright © 2022 Inderscience Enterprises Ltd.

Oil price shocks and exchange rate dynamics: Evidence from decomposed and partial connectedness measures for oil importing and exporting economies

This paper introduces a novel framework of partial connectedness measures to investigate contagion dynamics between different types of oil price shocks and exchange rates. Oil price shocks are persistent net transmitters of shocks within the network. It is found that the oil shock net spillovers made up most of the net connectedness values in most countries during the pre-COVID-19 period. Both oil exporters and oil importers, without any exception, were all net receivers of shocks. However, during the COVID-19 era, there were significant differences within the groups of countries. It is also observed that the oil-risk shock transmits to the other two types of oil shocks in the pre-COVID-19 and during the COVID-19 periods. The results may have potential implications for traders. © 2023 Elsevier B.V.