OIL PRICES, ECONOMIC POLICY UNCERTAINTY AND STOCK MARKET RETURNS IN OIL IMPORTING COUNTRIES: THE IMPACT OF COVID-19 PANDEMIC

Abstract

This study examines the nexus between oil prices, economic policy uncertainty and stock markets in a panel of selected major oil importing countries between June 2014 and October 2020. We analyzed China, India, Germany, Italy and Japan in the study because these countries are among the largest oil importer countries in the economic policy uncertainty index developed by Economics Policy Uncertainty Platform. We split the period into three sub-periods as June 2014- February 2016, March 2016-December 2019 and January - October 2020 and employed several econometric models to analyze the relation between the variables in different economic conditions and to identify how COVID-19 pandemic has influenced the effect of oil prices and economic policy uncertainty on the stock markets. Empirical results show that the pandemic changed the dynamics of the relations between the variables and especially the effect of oil prices on the stock markets has grown stronger for the oil importing countries.