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Fluctuation in the global oil market, stock market volatility, and economic policy uncertainty: A study of the US and China

Yang, Tianle; Zhou, Fangxing; Du, Min; Du, Qunyang; Zhou, Shirong

Authors

Tianle Yang

Fangxing Zhou

Qunyang Du

Shirong Zhou



Abstract

This paper investigates the relationships between the global oil market, stock markets, and economic policy, focusing on China and the US. We use a time-varying parameter stochastic volatility vector autoregression model to examine the transmission mechanisms between fluctuation in the global oil price, the volatility of the Chinese and US stock markets, and economic policy uncertainty in China and the US from 2003 to 2020. We observe significant correlations between the volatility of the two countries’ stock markets and fluctuation in the global oil price. Compared with the Chinese stock market, the US stock market has a greater impact on the global oil market. We also find that an increase in economic policy uncertainty in the two countries exacerbates fluctuation in the global oil price, particularly during times of crisis. In turn, greater fluctuation in the global oil price increases stock market volatility and economic policy uncertainty in both countries.

Journal Article Type Article
Acceptance Date Aug 20, 2021
Online Publication Date Aug 30, 2021
Publication Date 2023-02
Deposit Date Nov 18, 2021
Journal The Quarterly Review of Economics and Finance
Print ISSN 1062-9769
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 87
Pages 377-387
DOI https://doi.org/10.1016/j.qref.2021.08.006
Keywords Global oil price, Stock market volatility, Economic policy uncertainty, Fluctuation
Public URL http://researchrepository.napier.ac.uk/Output/2822817