THE RELATIONSHIP OF GLOBAL ECONOMIC POLICY UNCERTAINTY AND CRUDE OIL PRICES: APPLICATION OF CAUSALITY IN FREQUENCY

Abstract

Purpose- In this study, the effect of global economic policy uncertainty on crude oil prices is investigated. Methodology- In the study, which considers the Global Economic Policy Uncertainty (GEPU) Index as an indicator of global economic policy uncertainty and the American WTI crude oil spot and forward prices for crude oil, the data set consists of monthly data for the period January 1997-April 2022. These data were analyzed by Breitung and Candelon's (2006) frequency causality test. Findings- According to the results of Breitung and Candelon's (2006) frequency causality test, only long-term causality relationship was found from GEPU to American WTI crude oil spot and futures prices. In addition, it is seen that there is no causality relationship from American WTI crude oil spot prices to GEPU in short-term, mid-term and long-term while there is only long-term causality from American WTI crude oil future prices to GEPU. Conclusion- It is thought that economic policy uncertainty tends to affect crude oil prices due to differences in demand. In line with these results, it becomes important for investors to consider the GEPU Index and the economic conditions affecting this index within the scope of their hedging strategies.

Keywords

• Economic policy uncertainty
• crude oil
• spot market
• futures market
• causality in frequency

KÜRESEL EKONOMİK POLİTİKA BELİRSİZLİĞİ VE HAM PETROL FİYATLARI İLİŞKİSİ: FREKANSTA NEDENSELLİK UYGULAMASI

Abstract

Amaç- Çalışmada küresel ekonomik politika belirsizliğinin ham petrol fiyatları üzerindeki etkisi araştırılmaktadır. Metodoloji- Küresel ekonomik politika belirsizliği göstergesi olarak Küresel Ekonomik Politika Belirsizlik (GEPU) Endeksi ile ham petrol için Amerikan WTI ham petrol spot ve vadeli fiyatlarının dikkate alındığı çalışmada, veri seti Ocak 1997-Nisan 2022 dönemi aylık verilerinden oluşmaktadır. Bu veriler ise Breitung ve Candelon’un (2006) frekansta nedensellik testiyle analiz edilmiştir. Bulgular- Breitung ve Candelon’un (2006) frekansta nedensellik testi sonuçlarına göre GEPU’dan Amerikan WTI ham petrol spot ve vadeli fiyatlarına doğru sadece uzun dönemde nedensellik ilişkisi tespit edilmiştir. Ayrıca Amerikan WTI ham petrol spot fiyatlarından GEPU’ya yönelik kısa, orta ve uzun dönemde herhangi bir nedensellik ilişkisine ulaşılamadığı, Amerikan WTI ham petrol future fiyatlarından GEPU’ya doğru ise sadece uzun dönemde bir nedenselliğin olduğu belirlenmiştir. Sonuç- Ekonomi politikası belirsizliğinin taleplerle ilgili farklılıklardan kaynaklı olarak ham petrol fiyatlarını etkileme eğiliminde olduğu düşünülmektedir. Bu sonuçlar doğrultusunda yatırımcıların riskten korunma stratejileri kapsamında GEPU Endeksi’ni ve bu endekse etki eden ekonomik koşulları dikkate almalarının gerekliliği önem kazanmaktadır.

Keywords

• Ekonomik politika belirsizliği
• ham petrol
• spot piyasa
• vadeli piyasa
• frekansta nedensellik

References

1. Ahmed, M. Y. ve Sarkodie, S. A. (2021). COVID-19 pandemic and economic policy uncertainty regimes affect commodity market volatility. Resources Policy 74, 1-12. https://doi.org/10.1016/j.resourpol.2021.102303
2. Aloui, R., Gupta, R. ve Miller, S. M. (2016). Uncertainty and crude oil returns. Energy Economics 55, 92-100. http://dx.doi.org/10.1016/j.eneco.2016.01.012
3. Antonakakis, N., Chatziantoniou, I. ve Filis, G. (2014). Dynamic spillovers of oil price shocks and economic policy uncertaint. Energy Economics, 1-15. http://dx.doi.org/10.1016/j.eneco.2014.05.007
4. Badshah, I., Demirer, R. ve Suleman, T. (2019). The effect of economic policy uncertainty on stock-commodity correlations and its implications on optimal hedging. Energy Economics, 1-27. https://doi.org/10.1016/j.eneco.2019.104553
5. Bakas, D. ve Triantafyllou, A. (2018). Volatility forecasting in commodity markets using macro uncertainty. Energy Economics 81, 79-94. https://doi.org/10.1016/j.eneco.2019.03.016
6. Baker, S., Bloom, N. ve Davis, S. J. (2013). Measuring economic policy uncertainty. http://www.policyuncertainty.com/media/EPU_BBD_2 013.pdf (Erişim Tarihi: 24.04.2022).
7. Baker, S., Bloom, N. ve Davis, S. J. (2015). Measuring economic policy uncertainty. http://www.policyuncertainty.com/media/BakerBloomD avis.pdf (Erişim Tarihi: 24.04.2022).
8. Baker, S., Bloom, N. ve Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131(4), 1539-1636. https://doi.org/10.1093/qje/qjw024

9. Ben Haddad, H., Imed, M. ve Abdessalem, G. (2021). The dynamic spillover effects of macroeconomic and financial uncertainty on commodity markets uncertainties. Economies, 9(91), https://doi.org/10.3390/economies9020091
10. Berger, T. ve Uddin, G. S. (2016). On the dynamic dependence between equity markets, commodity futures and economic uncertainty indexes. Energy Economics 56, 374-383. https://doi.org/10.1016/j.eneco.2016.03.024
11. Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77(3), 623-685. https://doi.org/10.3982/ECTA6248
12. Breitung, J. ve Candelon, B. (2006). Testing for short-and long-run causality: a frequency-domain approach. Journal of Econometrics, 132(2), 363-378.
13. Cerda, R., Silva, Á. ve Valente, J. T. (2018). Impact of economic uncertainty in a small open economy: the case of Chile. Applied Economics, 50(26), 2894-2908. https://doi.org/10.1080/00036846.2017.1412076
14. Davis, S. J. (2016). An index of global economic policy uncertainty. NBER Working Paper No. 22740. http://faculty.chicagobooth.edu/steven.davis/pdf/Global%20Economic%20Policy%20Uncertainty%209%20October%202016.pdf (Erişim Tarihi: 24.04.2022).
15. Dickey, D. A. ve Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74, 427-431.
16. Dickey, D. A. ve Fuller, W. A. (1981). Likelihood ratio statistics for auto-regressive time series with a unit root. Econometrica, 49(4), 1057- 1072. Global Economic Policy Uncertainty Index, https://www.policyuncertainty.com/global_monthly.html (Erişim Tarihi: 10.05.2022).
17. Hill, R. C., Griffiths, W. E. ve Lim, G. C. (2011). Principles of econometrics. USA: John Wiley & Sons, Inc. Investing.com (Erişim Tarihi: 10.05.2022).
18. Ji, Q., Liu, B. Y., Nehler, H. ve Uddin, G. S. (2018). Uncertainties and extreme risk spillover in the energy markets: a time-varying copula-based CoVaR approach. Eneeco, 1-34. http://dx.doi.org/10.1016/j.eneco.2018.10.010
19. Joets, M., Mignon, V. ve Razafindrabe, T. (2017). Does the volatility of commodity prices reflect macroeconomic uncertainty?. Energy Economics, 1-37. http://dx.doi.org/10.1016/j.eneco.2017.09.017
20. Julio, B. ve Yook, Y. (2012). Political uncertainty and corporate investment cycles. Journal of Finance, 67(1), 45-83. https://doi.org/10.1111/j.1540-6261.2011.01707.x
21. Kang, W., De Gracia, F. P. ve Ratti, R. A. (2016). Oil price shocks, policy uncertainty, and stock returns of oil and gas corporations. Journal of International Money and Finance, 1-34. http://dx.doi.org/doi: 10.1016/j.jimonfin.2016.10.003
22. Kang, W. ve Ratti, R. A. (2013). Oil shocks, policy uncertainty and stock market return. Journal of International Financial Markets, Institutions & Money 26, 305-318. http://dx.doi.org/10.1016/j.intfin.2013.07.001
23. Korkmaz, Ö. ve Güngör, S. (2018). Küresel ekonomi politika belirsizliğinin Borsa İstanbul’da işlem gören seçilmiş endeks getirileri üzerindeki etkisi. Anemon Muş Alparslan Üniversitesi Sosyal Bilimler Dergisi, 6(ICEESS’18), 211-219. http://dx.doi.org/10.18506/anemon.452749
24. Kurt Cihangir, Ç. ve Koçoğlu, Ş. (2021). Oil prices, economic policy uncertainty and stock market returns in oil importing countries: the impact of COVID-19 pandemic. Hacettepe Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 40(1), 144-163. https://doi.org/10.17065/huniibf.933167
25. Liu, L. ve Zhang, T. (2015). Economic policy uncertainty and stock market volatility. Finance Research Letters 15, 99-105. https://doi.org/10.1016/j.frl.2015.08.009
26. Lyu, Y., Tuo, S., Wei, Y. ve Yang, M. (2021). Time-varying effects of global economic policy uncertainty shocks on crude oil price volatility: new evidence. Resources Policy 70, 1-12, https://doi.org/10.1016/j.resourpol.2020.101943
27. Mody, A., Ohnsorge, F. ve Sandri, D. (2012). Precautionary savings in the great recession. IMF Working Paper, 1-37.
28. Ozcelebi, O. (2021). Assessing the impacts of global economic policy uncertainty and the long-term bond yields on oil prices. Applied Economic Analysis, 29(87), 226-244. https://doi.org/10.1108/AEA-05-2020-0046
29. Phillips, P. C. B. ve Perron, P. (1988). Testing for a unit root in time series regression, Econometrica, 75(2), 335-346.
30. Scarcioffolo, A. R. ve Etienne, X. L. (2018). Does economic policy uncertainty affect energy market volatility and vice-versa?. 2018 Annual Meeting, August 5-7, Washington, D.C. 273976, Agricultural and Applied Economics Association. 1-33, http://dx.doi.org/10.22004/ag.econ.273976
31. Shahzad, S. J. H., Raza, N., Balcilar, M., Ali, S. ve Shahbaz, M. (2017). Can economic policy uncertainty and investors sentiment predict commodities returns and volatility?. Resources Policy 53, 208-218. https://doi.org/10.1016/j.resourpol.2017.06.010
32. Wu, T. P., Liu, S. B. ve Hsueh, S. J. (2016). The causal relationship between economic policy uncertainty and stock market: a panel data analysis. International Economic Journal, 30(1), 109-122.
33. Zhang, G., Han, J., Pan, Z. ve Huang, H. (2015). Economic policy uncertainty and capital structure choice: evidence from China. Economic Systems, 39(3), 439–457. https://doi.org/10.1016/j.ecosys. 2015.06.003
34. Ziaei, S. M. (2021). The relationship between oil prices, global economic policy uncertainty and financial market stress. Journal of Energy Markets, 14(3), 1-16. https://doi.org/10.21314/JEM.2021.002