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Register a new userDo COVID-19 and crude oil prices drive the US economic policy uncertainty?
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Added by
Claudiu Albulescu
Publication date
2020
fields
Financial
and research's language is
English
Authors
Claudiu Albulescu
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This paper investigates the effect of the novel coronavirus and crude oil prices on the United States (US) economic policy uncertainty (EPU). Using daily data for the period January 21-March 13, 2020, our Autoregressive Distributed Lag (ARDL) model shows that the new infection cases reported at global level, and the death ratio, have no significant effect on the US EPU, whereas the oil price negative dynamics leads to increased uncertainty. However, analyzing the situation outside China, we discover that both new case announcements and the COVID-19 associated death ratio have a positive influence on the US EPU.
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We propose the Hawkes flocking model that assesses systemic risk in high-frequency processes at the two perspectives -- endogeneity and interactivity. We examine the futures markets of WTI crude oil and gasoline for the past decade, and perform a comparative analysis with conditional value-at-risk as a benchmark measure. In terms of high-frequency structure, we derive the empirical findings. The endogenous systemic risk in WTI was significantly higher than that in gasoline, and the level at which gasoline affects WTI was constantly higher than in the opposite case. Moreover, although the relative influences degree was asymmetric, its difference has gradually reduced.
We develop an air mobility index and use the newly developed Apples driving trend index to evaluate the impact of COVID-19 on the crude oil price. We use quantile regression and stationary and non-stationary extreme value models to study the impact. We find that both the textit{air mobility index} and textit{driving trend index} significantly influence lower and upper quantiles as well as the median of the WTI crude oil price. The extreme value model suggests that an event like COVID-19 may push oil prices to a negative territory again as the air mobility decreases drastically during such pandemics.
This paper investigates the impact of economic policy uncertainty (EPU) on the crash risk of US stock market during the COVID-19 pandemic. To this end, we use the GARCH-S (GARCH with skewness) model to estimate daily skewness as a proxy for the stock market crash risk. The empirical results show the significantly negative correlation between EPU and stock market crash risk, indicating the aggravation of EPU increase the crash risk. Moreover, the negative correlation gets stronger after the global COVID-19 outbreak, which shows the crash risk of the US stock market will be more affected by EPU during the pandemic.
We provide a new investigation of the relationship between oil and stock prices in the context of the outbreak of the new coronavirus crisis. Specifically, we assess to what extent the uncertainty induced by COVID-19 affects the interaction between oil and the United States (US) stock markets. To this end, we use a wavelet approach and daily data from February 18, 2020 to August 15, 2020. We identify the lead-lag relationship between oil and stock prices, and the intensity of this relationship at different frequency cycles and moments in time. Our unique findings show that co-movements between oil and stock prices manifest at 3-5-day cycle and are stronger in the first part of March and the second part of April 2020, when oil prices are leading stock prices. The partial wavelet coherence analysis, controlling for the effect of COVID-19 and US economic policy-induced uncertainty, reveals that the coronavirus crisis amplifies the shock propagation between oil and stock prices.
Using data on 17 listed public banks from Russia over the period 2008 to 2016, we analyze whether international oil prices affect the bank stability in an oil-dependent country. We posit that a decrease in international oil prices has a negative long-run macroeconomic impact for an oil-exporting country, which further deteriorates the bank financial stability. More specifically, a decrease in international oil prices leads for an oil-exporting country as Russia to a currency depreciation and to a deterioration of the fiscal stance. In addition, given the positive correlation of oil and stock prices documented by numerous previous studies, a decrease in international oil prices represents a negative signal for the stock markets investors, negatively affecting banks share prices and thus, their capacity to generate sustainable earnings. In this context, the bank financial stability can be menaced. With a focus on public listed banks and using a Pool Mean Group (PMG) estimator, we show that an increase in international oil prices and in the price to book value ratio has a long-run positive effect on Russian public banks stability, and conversely. While positive oil-price shocks contribute to bank stability in the long run, an opposite effect is recorded for negative shocks. However, no significant impact is documented in the short run. Our findings are robust to different bank stability specifications, different samples and control variables.
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