The Interaction Between Oil Price and Financial Stress: Evidence from the U.S. Data

Yıl 2018, , 15 - 36, 31.05.2018

Onur Polat

https://doi.org/10.25295/fsecon.2018.02.002

Cited By: 8

Öz

This study examines linkages between daily oıl price dynamics and financial stress. We analyze the dynamic interaction mechanism between daily WTI crude oil prices and financial stress index of the United States developed by Polat (2017) with Structural VAR model in 01/10/1993 - 11/18/2016 period. The empirical results of the study suggest that there exist a significant relationship between oil price dynamics and financial stress and the relationship is dominated by the short-run.

Anahtar Kelimeler

Oil Price Shocks, Financial Stress Index, SVAR, DCC-GARCH

Kaynakça

• Afonso, A., & Martins, M. M. (2012). Level, slope, curvature of the sovereign yield curve, and fiscal behaviour. Journal of Banking & Finance, 36(6), 1789-1807.
• Aloui, C., Nguyen, D. K., & Njeh, H. (2012). Assessing the impacts of oil price fluctuations on stock returns in emerging markets. Economic Modelling, 29(6), 2686-2695.
• Apergis, N., & Miller, S. M. (2009). Do structural oil-market shocks affect stock prices? Energy Economics, 31(4), 569-575.
• Arouri, M. E. H., & Nguyen, D. K. (2010). Oil prices, stock markets and portfolio investment: evidence from sector analysis in Europe over the last decade. Energy Policy, 38(8), 4528-4539.
• Arzamasov, V., & Penikas, H. (2014). A Financial Stability Index for Israel. Procedia Computer Science, 31, 985-994.
• Balakrishnan, R. D. (2011). The transmission of financial stress from advanced to emerging economies. Emerging Markets Finance and Trade, 47(sup2), 40-68.
• Barsky, R. B., & Kilian, L. (2004). Oil and the Macroeconomy since the 1970s. The Journal of Economic Perspectives, 18(4), 115-134.
• Basher, S. A., & Sadorsky, P. (2006). Oil price risk and emerging stock markets. Global finance journal, 17(2), 224-251.
• Bollerslev, T. (1990). Modelling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH model. The review of economics and statistics, 498-505.
• Brave, S. A., & Butters, R. A. (2011). Monitoring financial stability: A financial conditions index approach. Economic Perspectives, 35(1), 1-22.
• Brown, S. P., & Yucel, M. K. (1999). Oil prices and US aggregate economic activity: a question of neutrality. Economic & Financial Review, 16-23.
• Cardarelli, R., Elekdag, S., & Lall, S. (2011). Financial stress and economic contractions. Journal of Financial Stability, 7(2), 78-97.
• Cerqueira, E., L.; Murcia, C., I. (2015). A Spanish Financial Market Stress Index (FMSI). Madrid: CNMV.
• Cevik, E. I., Dibooglu, S., & Kenc, T. (2013). Measuring financial stress in Turkey. Journal of Policy Modeling, 35(2), 370-383.
• Chen, W., Hamori, S., & Kinkyo, T. (2014). Macroeconomic impacts of oil prices and underlying financial shocks. Journal of International Financial Markets, Institutions and Money, 29, 1-12.
• Ciner, C. (2001). Energy shocks and financial markets: nonlinear linkages. Studies in Nonlinear Dynamics & Econometrics, 5(3), 203-212.
• Cong, R. G., Wei, Y. M., Jiao, J. L., & Fan, Y. (2008). Relationships between oil price shocks and stock market: An empirical analysis from China. Energy Policy, 36(9), 3544-3553.
• Cuñado, J., & de Gracia, F. P. (2003). Do oil price shocks matter? Evidence for some European countries. Energy Economics, 25(2), 137-154.
• Cunado, J., & de Gracia, F. P. (2014). Oil price shocks and stock market returns: Evidence for some European countries. Energy Economics, 42, 365-377.
• Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431.
• Elliott, G., Rothenberg, T. J., & Stock, J. H. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64(4), 813-836.
• Engle, R. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20(3), 339-350.
• Faff, R. W., & Brailsford, T. J. (1999). Oil price risk and the Australian stock market. Journal of Energy Finance & Development, 4(1), 69-87.
• Ferderer, J. P. (1997). Oil price volatility and the macroeconomy. Journal of macroeconomics, 18(1), 1-26.
• Filis, G. D. (2011). Dynamic correlation between stock market and oil prices: The case of oil-importing and oil-exporting countries. International Review of Financial Analysis, 20(3), 152-164.
• Guo, H., & Kliesen, K. L. (2005). Oil price volatility and US macroeconomic activity. Review-Federal Reserve Bank of Saint Louis, 87(6), 669-684.
• Hakkio, C. S., & Keeton, W. R. (2009). Financial stress: what is it, how can it be measured, and why does it matter? Economic Review-Federal Reserve Bank of Kansas City, 94(2), 5-50.
• Hamilton, J. D. (1983). Oil and the macroeconomy since World War II. Journal of political economy, 91(2), 228-248.
• Hamilton, J. D. (1996). This is what happened to the oil price-macroeconomy relationship. Journal of Monetary Economics, 38(2), 215-220.
• Hamilton, J. D., & Herrera, A. M. (2004). Oil shocks and aggregate macroeconomic behavior: the role of monetary policy: a comment. Journal of Money, Credit, and Banking, 36(2), 265-286.
• Hatzius, J., Hooper, P., Mishkin, F. S., Schoenholtz, K. L., & Watson, M. W. (2010). Financial conditions indexes: A fresh look after the financial crisis. Cambridge, MA: National Bureau of Economic Research.
• Hooker, M. A. (1996). What happened to the oil price-macroeconomy relationship? Journal of monetary Economics, 38(2), 195-213.
• Huang, B. N., Hwang, M. J., & Peng, H. P. (2005). The asymmetry of the impact of oil price shocks on economic activities: an application of the multivariate threshold model. Energy Economics, 27(3), 455-476.
• Huang, R. D., Masulis, R. W., & Stoll, H. R. (1996). Energy shocks and financial markets. The Journal of Futures Markets, 16(1), 1-27.
• Jammazi, R. (2012). Oil shock transmission to stock market returns: Wavelet-multivariate Markov switching GARCH approach. Energy, 37(1), 430-454.
• Jones, C. M., & Kaul, G. (1996). Oil and the stock markets. The Journal of Finance, 51(2), 463-491.
• Kang, W., Ratti, R. A., & Yoon, K. H. (2015). The impact of oil price shocks on the stock market return and volatility relationship. Journal of International Financial Markets, Institutions and Money, 34, 41-54.
• Kremer, M., Lo Duca, M., & Holló, D. (2012). CISS-a composite indicator of systemic stress in the financial system. ECB. Frankfurt am Main: European Central Bank.
• Lee, B. R., Lee, K., & Ratti, R. A. (2001). Monetary policy, oil price shocks, and the Japanese economy. Japan and the World Economy, 13(3), 321-349.
• Lee, K., Ni, S., & Ratti, R. A. . (1995). Oil shocks and the macroeconomy: the role of price variability. The Energy Journal, 39-56.
• Levin, A., Lin, F., C., Chu, J., S., C. (2002). Unit root tests in panel data:asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1-24.
• Loungani, P. (1986). Oil price shocks and the dispersion hypothesis. Review of Economics and Statistics, 536-539.
• Merton, R. C. (1973). An intertemporal capital asset pricing model. Econometrica: Journal of the Econometric Society, 867-887.
• Miller, J. I., & Ratti, R. A. (2009). Crude oil and stock markets: Stability, instability, and bubbles. Energy Economics, 31(4), 559-568.
• Morales, M. A. (2010). A financial stability index for Colombia. Annals of Finance, 6(4), 555-581.
• Mork, K. A. (1989). Oil and the macroeconomy when prices go up and down: an extension of Hamilton's results. Journal of political Economy, 97(3), 740-744.
• Mork, K. A., Olsen, Ø., & Mysen, H. T. . (1994). Macroeconomic responses to oil price increases and decreases in seven OECD countries. The Energy Journal, 19-35.
• Nazlioglu, S., Soytas, U., & Gupta, R. (2015). Oil prices and financial stress: A volatility spillover analysis. Energy Policy, 82, 278-288.
• Nelson, C. R., & Siegel, A. F. (1987). Pparsimonious modeling of yield curves. Journal of Business, 60(4), 473-489.
• Papapetrou, E. (2001). Oil price shocks, stock market, economic activity and employment in Greece. Energy economics, 23(5), 511-532.
• Park, J., & Ratti, R. A. (2008). Oil price shocks and stock markets in the US and 13 European countries. Energy economics, 30(5), 2587-2608.
• Patel, S. A., & Sarkar, A. (1998). Crises in developed and emerging stock markets. Financial Analysts Journal, 54(6), 50-61.
• Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346.
• Polat, O. (2017). The Impacts of Energy Price Shoilitycks on Financial Stability. Economics. Ankara: Hacettepe University.
• Rasche, R. H., & Tatom, J. A. (1977, 6). Energy resources and potential GNP. Federal Reserve Bank of St. Louis Review, 10-24.
• Raymond, J. E., & Rich, R. W. . (1997). Oil and the macroeconomy: A Markov state-switching approach. Journal of Money, Credit, and Banking, 193-213.
• Sadorsky, P. (1999). Oil price shocks and stock market activity. Energy economics, 21(5), 449-469.
• Straetmans, S., & Chaudhry, S. M. (2015). Tail risk and systemic risk of US and Eurozone financial institutions in the wake of the global financial crisis. Journal of International Money and Finance, 58, 192-223.
• Tang, W., Wu, L., & Zhang, Z. (2010). Oil price shocks and their short-and long-term effects on the Chinese economy. Energy Economics, 32, S3-S14.
• Toda, H. Y., & Yamamoto, T. (1995). Statistical inference in vector autoregressions with possibly integrated processes. Journal of econometrics, 66(1), 225-250.
• Wang, Y., Wu, C., & Yang, L. (2013). Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries. Journal of Comparative Economics,, 41(4), 1220-1239.