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Geopolitical risks, oil price shocks and inflation: Evidence from a TVP–SV–VAR approach

Yang, Tianle; Dong, Qingyuan; Du, Min; Du, Qunyang

Authors

Tianle Yang

Qingyuan Dong

Qunyang Du



Abstract

Employing a TVP–SV–VAR model, this study investigates the dynamic effects of geopolitical risks, oil price shocks, and inflation from January 2000 to July 2022 in China, the US, and 27 European countries. The findings show that the relationship between geopolitical risks, oil prices and inflation changes dynamically over time. Geopolitical risks exert a more substantial influence on industrial demand for oil production than on oil supply disruptions, and therefore, they do not result in a sustained rise in oil prices. However, the heightened inflation observed since the COVID-19 pandemic stems from dwindling oil supplies, elevated oil prices, and an imbalance between industrial production and consumer demand driven by escalating geopolitical risks. Our findings suggest that governments should formulate and implement comprehensive and multifaceted policy measures to address the intricate interplay among geopolitical risks, fluctuations in oil prices, and the dynamics of inflation.

Citation

Yang, T., Dong, Q., Du, M., & Du, Q. (2023). Geopolitical risks, oil price shocks and inflation: Evidence from a TVP–SV–VAR approach. Energy Economics, 127(Part B), Article 107099. https://doi.org/10.1016/j.eneco.2023.107099

Journal Article Type Article
Acceptance Date Oct 3, 2023
Online Publication Date Oct 13, 2023
Publication Date 2023-11
Deposit Date Jan 23, 2024
Publicly Available Date Oct 14, 2025
Print ISSN 0140-9883
Electronic ISSN 1873-6181
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 127
Issue Part B
Article Number 107099
DOI https://doi.org/10.1016/j.eneco.2023.107099
Keywords Geopolitical risks, Oil price shocks, Inflation, TVP–SV–VAR
Public URL http://researchrepository.napier.ac.uk/Output/3491343