Dynamic causality interplay from COVID-19 pandemic to oil price, stock market, and economic policy uncertainty: evidence from oil-importing and oil-exporting countries

Abstract

In this study we examine the time-varying causal effect of the novel COVID-19 pandemic in the major oil-importing and oil-exporting countries on the oil price changes, stock market volatilities and the economic uncertainty using the wavelet coherence and network analysis. During the period of the pandemic, we explore such relationship by resorting to the wavelet coherence and gaussian graphical model (GGM) frameworks. Wavelet analysis enables us to measure the dynamics of the causal effect of the novel covid-19 pandemic in the time–frequency space. Regarding the findings displayed herein, we first found that the COVID-19 pandemic has a severe influence on oil prices, stock market indices, and the economic uncertainty. Second the intensity of the causality effect is stronger in the longer horizon than in the short ones, suggesting that the causality exercise continues. Our findings also provide evidence that the COVID-19 pandemic and oil price changes in oil-importing countries mirror those in oil-exporting countries and vice versa. Further, the COVID-19 pandemic has a profound immediate time–frequency effect on the US, Japanese, South Korean, Indian, and Canadian economic uncertainties. A better understanding of oil and stock market prices in the oil-importing and oil-exporting countries is vital for investors and policymakers, specially since the novel unprecedented COVID-19 crisis has been recognized among the most serious ever happened. Thus, the findings suggest that the authorities should strongly take efficient actions to minimize risk.

Analyzing the Nexus Between Geopolitical Risk, Policy Uncertainty, and Tourist Arrivals: Evidence From the United States

“…In essence, the economy, tourism, and other business activities are all affected significantly by the various local and foreign political environments (Antonakakis et al, 2017). In this sense, geopolitical tensions and associated events such as elections trigger political uncertainty and frictions, leading to unexpected consequences or events resulting in economic policy uncertainty (Khalfaoui et al, 2022). Thus, political and policy uncertainty can significantly affect tourism imports, overnight stays numbers, tourist arrivals, and other tourism-related indicators (Demir, Gozgor, & Paramati, 2019; Hailemariam & Ivanovski, 2021a).…”

The degree of Asian-European markets connectedness: examining the impact of global disorders using a spectral analysis

“…For the theoretical setup an empirical applications of the Gaussian graphical model (GGM) see e.g. Malioutov et al (2006) and Khalfaoui et al (2022).…”

Time-varying Relationship between Oil Prices, Stock Market Performance, and Covid-19 in United States of America, China, and Malaysia: Evidence from Wavelet Approach

“…While low oil prices benefit consumers and businesses, the stability of crude oil prices impacts the oil industry and the functioning of the global economy. Khalfaoui, Solarin, Al-Qadasi, and Ben Jabeur (2022) explore the dynamic causal effect of the Covid-19 pandemic in significant oil importing and exporting countries in relation to oil price changes, stock market volatility and economic uncertainties. It is evident that the pandemic has a severe time frequency impacts on oil prices in both oil import and export countries.…”