Influence Of Oil Prices Research Articles

Pass-through of oil prices to Brazilian inflation: An analysis between 2014 and 2023

ABSTRACT The price of fuels, and consequently, the price of oil, is one of the elements of historical relevance for the general price level that the Brazilian population faces, given the country’s dependency on the road transportation mode for product distribution and the potential ripple effects that the oil price naturally exerts on other sectors of the economy. Therefore, the aim of the present study is to quantify the influence of oil prices on the overall price index of the Brazilian economy for the period between January 2014 and May 2023. To achieve this objective, a model based on a hybrid New Keynesian Phillips curve was constructed, and the estimation was performed using Structural Vector Error Correction (SVEC) models. As a result, we find that, although oil prices are not the most significant drivers of inflation, their influence is present, positive, and persists for a considerable number of periods.

Energy Prices and Their Impact on US Stock Indices: A Wavelet- based Quantile-on-Quantile Regression Approach

This study delves into the effects of crude oil and gas prices on the United States’ (US) conventional, Islamic, and environmental, social, and governance (ESG) stock indices from January 2013 to December 2022. Decomposing original time series data to minimise inherent fluctuations and using the Quantile-on-Quantile (QQ) regression approach presents a nuanced view of how these energy prices impact different stock indices. The findings reveal that crude oil prices have a variable impact on the indices: high prices negatively influence the indices, low prices have a positive effect, and moderate prices yield a moderate positive impact. After data decomposition, this positive influence diminishes in higher quantiles, indicating an emerging neutral effect in stabilised conditions. In contrast, gas prices show a limited impact, with high prices slightly benefiting conventional and ESG indices but less so for the Islamic index. This suggests a more pronounced influence of oil prices on the indices, likely due to the dependence of many listed companies on oil. The study emphasises the importance of considering oil-related risks in investment strategies and highlights the asymmetric impact of crude oil prices on the US stock indices. These findings have significant implications for investors and policymakers. They underscore the need for careful consideration of oil price dynamics in investment decisions and the importance of staying vigilant against shifts in oil prices that could lead to market instability.

The impact of economy policy uncertainty and oil price shocks on G20 banks’ stock performance: Wavelet coherence and non-parametric causality in quantiles approach

This study employs nonparametric causality-in-quantiles and wavelet coherence techniques to examine the impact of economic policy uncertainty and oil price variations on bank stocks in twelve prominent global economies. The results reveal that the effects of both economic policy uncertainty and oil prices on bank stock values vary significantly across countries and over time. Notably, during stress periods, we observe an inverse relationship between economic policy uncertainty and bank stocks in multiple countries, namely, Brazil, Canada, France, India, Russia, and the USA, with Japan exhibiting a particularly strong and long-term adverse correlation. Similarly, the influence of oil prices is primarily observed during crisis periods, but it demonstrates a substantial co-movement with bank stocks across the sample countries except Brazil. Our empirical analysis holds valuable implications for policymakers, bankers, investors, and portfolio managers.

Resource curse in OPEC with varied levels of financial regulations and constraints: The role of oil price shocks and digital finance

Economic growth and development are crucial for global economies, and a nation's physical, human, and natural resources significantly impact its trajectory. Natural resource-rich nations can benefit or face the resource curse. Henceforth, this study examines the economic growth of Organization of the Petroleum Exporting Countries (OPEC), considering digital finance, financial regulations, and oil price shocks. Understanding the intricate relationship between oil price fluctuations and digital finance within diverse financial regulatory frameworks is essential for a comprehensive grasp of the resource curse in OPEC. The research employed a bias-corrected dynamic panel and MMQR model to analyze datasets from 2004 to 2022. The study reveals that Oil price shocks have led to higher economic growth when there are moderate financial constraints. However, they have a detrimental effect when the financial system is either very constrained or highly unconstrained. Digital finance has been shown to enhance Gross Domestic Product (GDP) across various levels of financial regulations. The GDP of OPEC experiences a significant adverse effect when digital finance and oil price shocks are coupled, particularly in the presence of stringent financial rules. This outcome is mainly attributed to the adverse influence of oil prices. The findings above underscore the need for moderate levels of financial regulations that support the favorable influence of oil prices and digital finance on GDP. The study additionally suggests a prospective strategy for enhancing GDP growth in OPEC nations: facilitating digital finance.

The Effects of Oil Prices, Interest Rates, and Exchange Rates on the Indonesia Stock Market (IDX)

This research analyzes the influence of oil prices, interest rates, and the exchange rate on the Indonesia Stock Market (IDX). This research uses a quantile regression method approach with a total of 117 samples. The results show that world oil prices positively and significantly affect the Indonesia Stock Index (IDX). The results of the interest rate variable have a negative and significant effect on the Indonesia Stock Index (IDX). The exchange rate variable positively and significantly affects the Indonesia Stock Index (IDX). The results of this study can be used as one of the considerations for investors to have the best investment. Future research is expected to consider other factors, such as global economic policy uncertainty.

Asymmetric linkages among fintech, oil prices, governance, and growth in Southeast Asian economies

Fintech's disruptive potential in Southeast Asia can revolutionize financial inclusion and accelerate economic growth, warranting a comprehensive analysis of its interplay with oil prices, governance, and overall economic development. Against this backdrop, this study analyze the quantile-dependent (asymmetric) influence of oil prices, cumulative financial technology index, and institutional quality on economic growth for selected Southeast Asian countries from 1996 to 2021. Method of Moments Quantile Regression (MMQR) is used to analyse the asymmetric relationship, while the Dumitrescu-Hurlin Panel Causality test applies to the intrinsic casualty. The study's outcomes exposed the positive (negative) influence of Fintech and governance (oil prices); however, there marginal impact substantially varies at lower a higher growth quantiles. Labor headcount and capital stocks are among the main contributor of economic growth, specifically at higher growth quantiles (countries). Bi-directional causality has been confirmed through Dumitrescu-Hurlin Panel Causality test between Fintech, oil prices and governance with economic growth. Therefore, Generalized Method of Moment and Augmented Mean Group is further applied for robustness. After controlling reverse causality and endogeneity issues, the prior outcomes are validated. These findings offer valuable outcomes.

The dynamic nexus of oil price fluctuations and banking sector in China: A continuous wavelet analysis

The fluctuations in World and national energy prices and energy policies might affect the financial and real sectors. This paper focuses on the nexus between oil prices and bank credits in China through continuous wavelet analyses in the following distinct ways. First, we observe the potential effects of oil prices on Chinese claims on the private sector by following the whole sample data, and, sub-samples of the data. Secondly, we account for higher and lower frequencies for sub-samples and the whole sample in the dynamic interaction between oil prices and Chinese claims on the private sector. Thirdly, this study provides more insight into understanding the influence of oil prices on the supply of credits through time-varying estimations at different scales (frequencies). The continuous wavelet analyses demonstrate a positive impact of Chinese oil prices on the Chinese claims on the private sector from 1999:06 to 2019:02 at a 3-8-year cycle which corresponds to the full liberalization of the Chinese domestic oil market. The positive effect of the world oil price on claims on the private sector is, however, restricted only for the sub-period 2005–2012 due to a relatively lower degree of regulation of the Chinese domestic market during this sub-period.

Economic diversification in Saudi Arabia: Comparing the impact of oil prices, geopolitical risk, and government expenditures

Our paper examines and compares the influence of oil prices, the international geopolitical risks, and government expenditures on Saudi Arabia's economic diversification during 1970–2020. We employ the bounds testing approach to cointegration to estimate the parameters of the Autoregressive Distributed Lag model to attain the paper's goal. Our results show that oil prices and international geopolitical risk harm the KSA diversification process in the short run. The destructive effect of oil prices continues in the long run, while the impact of the international geopolitical risk does not persist. On the other hand, government expenditures encourage the diversification attitude in the short and long run. This outcome highlights the capability of the KSA government to stimulate the diversification process. It is a positive sign of the state capitalism doctrine's impact on the KSA economic diversification mechanism. From a policy implication perspective, our paper suggests prioritizing economic diversification clearly on the KSA government's agenda. Simultaneously, strengthening the KSA institutional framework and developing new forms of the social contract are critical to motivating the diversification process.

Oil price fluctuations and economic growth–banking sector nexus: modeling for MENA countries

PurposeThe aim of this paper is to evaluate empirically the impact of oil price fluctuations on the relationship between banking sector development and economic growth in oil-importing MENA countries.Design/methodology/approachThe study used the newly developed panel autoregressive distributed lagged (ARDL) approach in order to address any potential endogeneity between research variables.FindingsThe empirical results show a unidirectional causality in the long run from oil price to both economic growth and banking sector development for oil-importing countries. Also, banking sector development not only leads directly to economic growth but also can play a moderator role in the oil price—economic growth nexus.Research limitations/implicationsThe study has two principal limitations. On the one hand, this study was conducted in a relatively limited sample of countries. On the other hand, the study did not consider others indicators for banking sector development and others macroeconomic variables.Practical implicationsThe results found have imperative implications for banks' managers, regulators and researchers. Bank managers should be more concerned with the negative repercussions of oil price fluctuations on the development of their banks. The regulatory authorities must emphasize policies and strategies to further strengthen their banking sector in order to alleviate the negative influence of oil price shocks on economic growth. Researchers focused on finance-growth nexus must take into account the potential influence of oil price shocks.Originality/valueThe developed conceptual model allows examining to what extent the oil price fluctuations might affect the relationship between economic growth and banking sector development. This effect is neither evaluated nor clarified in the relevant literature.

Dynamic connectedness between energy markets and the Brazilian cash market: An empirical analysis pre‐ and post‐COVID‐19

AbstractBrazil's significant commodity production is internationally recognized, yet the absence of a mature futures market exposes it to price risks and international shocks. This study explores the dynamic connectedness between commodity futures and the Brazilian cash markets, using a time‐varying parameter vector autoregressive model. We also assess COVID‐19's impact on this connectedness. We find a significant influence of oil prices on Brazilian ethanol prices, and particularly emphasize the Heating Oil spillover effect on ethanol in the post‐COVID‐19 era. We also note the ascension of Brazilian soybean spot markets' international significance since 2017, amplifying their role in global grain price discovery. Finally, by computing hedge ratios and effectiveness between commodity futures contracts and Brazilian spot prices, our study reveals soybean cash price as the most effective hedge. These insights deepen comprehension of connectedness within Brazilian commodity markets, thereby guiding investors and policymakers in strategic energy policy decisions.

Oil price returns and firm's fixed investment: A production pattern

This paper aims to enlarge the acquaintance with the influence of oil price returns on fixed investment of all Chinese non-financial listed companies. According to our empirical results, oil price returns have a statistically and economically significant and negative predictive power for firm's fixed investment. Other main findings can be summarized as follows: (i) this oil return effect is robust and consistent even considering oil shocks and its different sources; (ii) the heterogeneities of this effect across industries and industrial layers present a “production pattern”; (iii) a composite cost and the financing constraints theory reveal the heterogeneities across firms with varying financial constraints, investment irreversibility, and industry competition; (iv) a combination of changes in demand stimulation and cost pressures contributes to the asymmetric impacts of oil price returns, which vary throughout the oil prices distribution.

The impact of oil and natural gas prices on overnight risk in exchange rates based on the MVMQ-CAViaR models

Existing research has not yet studied the impact of oil and gas prices on the overnight risk in exchange rates. This paper examines the impact of oil and natural gas prices on the overnight risk in the RMB, HKD, and Yen. An MVMQ-CAViaR model of multiple markets and an MVMQ-CAViaR model of combined influence are proposed to measure the impact of oil and natural gas prices on the overnight risk in the Yen, HKD, and RMB from 2013 to 2019. The empirical results show that the overnight risk in the RMB, HKD, and Yen are impacted by lagged risk and that the RMB suffer from the largest risks. The three exchange rates' overnight risks are impacted by the risk in oil prices and natural gas prices. However, the Yen suffers from the largest risk, and the HKD suffers from the smallest risk. This shows the fragility of Japan's energy sector and its extreme dependence on energy imports. This shows that the energy sector has little impact on the Hong Kong economy, which is dominated by finance and trading. The two industries of trading and finance do not require much energy. The impact of natural gas price risks on the overnight risk in the RMB, HKD, and Yen is smaller than that of oil price risks. All overnight risks are affected by the combined influence of oil prices and natural gas prices. The Yen exchange rate suffers from the greatest influence relative to the HKD exchange rate and RMB exchange rate. Thus, when oil prices and natural gas prices fall at the same time, more attention should be paid to the effect of their combined influence on national exchange rates. Financial regulators need to be ready for exchange rate fluctuations. The MVMQ-CAViaR model of combined influence is more accurate than the MVMQ-CAViaR model of multiple markets, especially at the 1% significance level and for HKD, and the MVMQ-CAViaR model of combined influence produces better estimates.

Modeling and Mediating the Interaction between Oil Prices and Economic Sectors Advancement: The Case of Middle East

This paper analyzes the impact of international oil price influence on the different economic sectors and GDP in middle east region for the period 2007 to 2021. The study also empirically analysis the mediation role for oil price on various economic sectors and on GDP. The empirical analysis involved testing the direct effect for oil prices on sectors by correlation, simple and multiple regression through Ordinary Least Square (OLS) in addition to screen graphically this effect on all sectors including GDP. The main findings may be summarized as follows: employing the causality examination for the interaction among oil prices and economic sectors growth confirmed the significant adverse effect for oil prices on all sectors and total GDP. On other hand outcomes of multiple regression fail to discover the adverse influence of oil values on the combined impact of all sectors on GDP. The results of multiple regression revealed that the major sectors that only contributes significantly to GDP are; the agriculture, industrial, trading and real estate sectors.

Crude Oil Price Influence on the Performance of Selected Stocks from Different Sectors – An Empirical Analysis

Crude Oil Price Influence on the Performance of Selected Stocks from Different Sectors – An Empirical Analysis

Oil Price Shocks Dynamics, Stock Market Dynamics, and Exchange Rate Dynamics

This research was conducted to determine the influence of oil price, stocks and exchange rates in Indonesia. The data used in this research is secondary data in the form of time series data stretching from November 2014 to November 2022. The Quantitative research method, which is VAR (Vector Autoregressive) was used to test and analyze hypotheses with measurable data to obtain parameters from the variables’ influence. The study’s results found that oil prices significantly influenced Indonesia’s stock prices decline. Oil on the exchange rate was also significant, meaning last month's oil prices affected the exchange rate this month, and there was a depreciation. Still, the exchange rate was not significant for stock prices.

The dynamics of oil prices, uncertainty measures and unemployment: a time and frequency approach

PurposeThis study investigates the nexus between the returns on oil prices (OP) and unemployment (UR) while taking into account the influences of two of the most representative measures of uncertainty, the Baker et al. (2016) and Caldara and Iacovello (2021) indexes of economic policy uncertainty (EP) and geopolitical risks (GP), in the relationship.Design/methodology/approachThe authors use data on the US, Canada, France, Italy, Germany and Japan from January 2000 to February 2022 and the UK from January 2000 to December 2021. The authors then apply the continuous wavelet transform (CWT), wavelet coherence (WC), partial wavelet coherence (PWC) and multiple wavelet coherence (MWC) to examine the returns within a time and frequency framework.FindingsThe CWT tracks the movement and evolution of individual return series with evidence of high variances and heterogenous tendencies across frequencies that also align with critical events such as the GFC and COVID-19 pandemic. The WC reveals the presence of a bidirectional relationship between OP and UR across economies, showing that the two variables affect each other. The authors’ findings establish the predictive influence of oil price on unemployment in line with theory and also show that the variation in UR can impact the economy and alter the dynamics of OP. The authors employ the PWC and MWC to capture the impact of uncertainty indexes in the co-movement of oil price and unemployment in line with the theory of “investment under uncertainty”. Taking into account the common effects of EP and GP, PWC finds that uncertainty measures significantly drive the co-movement of oil prices and unemployment. This result is robust when the authors control for the influence of economic activity (proxied by the GDP) in the co-movement. Furthermore, the MWC reveals the combined intensity, strength and significance of both oil prices and the uncertainty measures in predicting unemployment across countries.Originality/valueThis study investigates the relationship between oil prices, uncertainty measures and unemployment under a time and frequency approach.HighlightsWavelet approaches are used to examine the relationship between oil prices and unemployment in the G7.We account for uncertainty measures in the dynamics of oil prices and unemployment.We observe a bidirectional relationship between oil prices and unemployment.Uncertainty measures significantly drive oil prices and unemployment co-movement.Both oil prices and uncertainty measures significantly drive unemployment.

Pass-through Effects of Oil Prices on LATAM Emerging Stocks before and during COVID-19: An Evidence from a Wavelet -VAR Analysis

Vector Auto regression model (VAR) a time -varying parameter is applied to study the effect of oil price shocks on the returns of stocks in the LATAM (Latin American) markets. Coherent Wavelet analysis highlights possibilities of connectedness of the oil price and LATAM stock markets through the presence of different patterns in a time series. The structural demand shocks standard deviations during the COVID-19 era remain high and the pass-through effects on stock returns due to oil prices differ for different time frames. The fundamental linkages are demonstrated due to oil market specific demand. The main motive of the research work is to identify the influence of oil price on stocks and identify the fundamental source of contagion. A random effects model is applied to the panel data of LATAM markets with the Global stock market index, MSCI (Morgan Stanley Capital International World Index), domestic money market rates and currency exchange rates during the period of study, 15 March 2019 to 31 July 2021 with 684 observations of controlled non-observed characteristics from individual country. The findings of this research recommend the pass-through effect of the oil prices on the stock market returns are based on time frequency. The contribution of this paper helps the policy makers to restore the confidence amongst the investors in the stock markets and strategies to be adopted by the investors to mitigate the risk by ideal portfolio management.

Nonlinear and Asymmetric Impact of Oil Prices on Exchange Rates: Evidence from South Asia

Abstract The study analyses the asymmetric and nonlinear influence of oil price on exchange rates of South Asian countries in time–frequency framework using wavelet technique. For empirical analysis, monthly data are examined from July 1983 to June 2018. Wavelet coherence results show that the variables are in phase, i.e., oil prices and exchange rates are positively correlated. It suggests that oil price influences exchange rates positively. The study also investigates the causal association between oil price and exchange rates using a nonlinear causality test. The results of nonlinear causality show that there is bidirectional causality between oil price and exchange in Bangladesh and India and unidirectional causality from oil price to exchange rate in Pakistan and Sri Lanka. The findings provide some important recommendations to investors and policy makers.

How does economic policy uncertainty respond to the global oil price fluctuations? Evidence from BRICS countries

In this paper, we explore the effect of global crude oil price on the economic policy uncertainty (EPU) in BRICS countries. For this purpose, we have adopted the hybrid wavelet artificial neural network model (wavelet-ANN) and the threshold vector auto-regression model (TVAR) to decompose the global crude oil price series into different market participants' horizons and to examine its comprehensive and detailed impact on different underlying oil price change regimes. The empirical results are as follows: Firstly, we find that oil price has heterogeneous effects on EPU in different BRICS countries. In contrast, the EPU of oil importers among BRICS countries (China and India) significantly negatively affect global oil price in the long run. Secondly, in each country, the influence of oil price on EPU shows a nonlinear and asymmetric feature. For China, a significant effect exists in the high-fluctuation regime in the short run. Moreover, the significant negative response of Brazil's EPU to oil prices also occurred in the high-fluctuation regime. Regarding Russia, the significant negative effect occurs in the low-fluctuation regime. Similar results can also be found in India. In the long run, only in India, the fluctuation of global crude oil price has a significant positive impact on India's EPU.

Time-frequency causality and connectedness between oil price shocks and the world food prices

The goal of this study is to examine the food and oil price nexus from January 1993 to September 2020. To have a broader aspect, we decompose oil prices into demand and supply shocks and food price index into sub-indices such as Meat, Dairy, Cereal, and sugar price indices. The findings show that the association between the food prices and indices with oil prices is bidirectional. Also, results show that the oil prices, demand, and supply shocks are the main contributors to volatility transmission compared to food prices and their sub-indices. The outcome of this study will help the agricultural sector's policymakers develop reliable and sound policy designs that will help control the influence of oil prices on food prices.