Oil Price Shocks, Global Financial Markets and Their Connectedness

Demirer, Rıza; Lapeña, Román Ferrer; Shahzad, Syed Jawad Hussain

doi:10.2139/ssrn.3394320

Cited by 1 publication

(2 citation statements)

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“…It was revealed that oil prices have a statistically significant impact on portfolio total sovereign bond returns for oil exporters and importers. By using a multifactor linear model, Demirer et al (2020) also investigated the impacts of the oil demand and supply shocks on sovereign bond markets for a large number of advanced and emerging economies and confirmed that the effect on sovereign bonds is driven by demand-related shocks. Furthermore, Bouri et al (2020) examined the relationship between sovereign risk and oil prices (volatility) through a quantile-based analysis and found that shocks in oil prices and oil volatility had an impact on the sovereign risk of MENA, while the relevant predictability is asymmetric across quantiles and time varying.…”

Section: Literature Reviewmentioning

confidence: 74%

“…This indicator is also a barometer of the long-term monetary conditions in the USA, while 10-year US Treasury yields have been recognized as a safe-haven asset in times of negative macroeconomic expectations. Considering their strong relationship with other financial indicators, it can also be suggested that the relevant bond yields are an indicator that has a high representative capacity to evaluate the relationship between the bond market and the oil market (Balcilar et al , 2020; Demirer et al , 2020; Gormus et al , 2018; Kang et al , 2014; Lee et al , 2017; Nazlioglu et al , 2020; Shahzad et al , 2017; Tule et al , 2017).…”

Section: Introductionmentioning

confidence: 99%

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Assessing the impacts of global economic policy uncertainty and the long-term bond yields on oil prices

Özçelebi

2021

AEA

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Purpose Might the impact of the global economic policy uncertainty (GEPU) and the long-term bond yields on oil prices be asymmetric? This paper aims to consider the effects of the GEPU and the US long-term government bond yields on oil prices using quantile-based analysis and nonlinear vector autoregression (VAR) model. The author hypothesized whether the negative and positive changes in the GEPU and the long-term bond yields of the USA have different effects on oil prices. Design/methodology/approach To address this question, the author uses quantile cointegration model and the impulse response functions (IRFs) of the censored variable approach of Kilian and Vigfusson (2011). Findings The quantile cointegration test showed the existence of non-linear cointegration relationship, whereas Granger-causality analysis revealed that positive/negative variations in GEPU will have opposite effects on oil prices. This result was supported by the quantile regression model’s coefficients and nonlinear VAR model’s IRFs; more specifically, it was stressed that increasing/decreasing GEPU will deaccelerate/accelerate global economic activity and thus lead to a fall/rise in oil prices. On the other hand, the empirical models indicated that the impact of US 10-year government bond yields on oil prices is asymmetrical, while it was found that deterioration in the borrowing conditions in the USA may have an impact on oil prices by slowing down the global economic activity. Originality/value As a robustness check of the quantile-based analysis results, the slope-based Mork test is used.

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Section: Literature Reviewmentioning

confidence: 74%