Financial and monetary policy responses to oil price shocks: evidence from oil-importing and oil-exporting countries

In this study, we investigate the financial and monetary policy responses to oil price shocks using a Structural VAR framework. We distinguish between net oil-importing and net oil-exporting countries. Since the 80s, a significant number of empirical studies have been published investigating the effect of oil prices on macroeconomic and financial variables. Most of these studies though, do not make a distinction between oil-importing and oil-exporting economies. Overall, our results indicate that the level of inflation in both net oil-exporting and net oil-importing countries is significantly affected by oil price innovations. Furthermore, we find that the response of interest rates to an oil price shock depends heavily on the monetary policy regime of each country. Finally, stock markets operating in net oil-importing countries exhibit a negative response to increased oil prices. The reverse is true for the stock market of the net oil-exporting countries. We find evidence that the magnitude of stock market responses to oil price shocks is higher for the newly established and/or less liquid stock markets.     

去伪存真:油价趋势与股票市场——来自“一带一路”35国的经验证据

油价波动深刻影响全球经济,严重时会造成全球股市动荡,甚至引发系统性金融风险。然而油价中的信息噪音严重阻碍国际油价对股票市场的预测效果。本文提出的移动平均法可有效减弱信息噪音,研究表明,本文基于移动平均法构建的油价趋势因子对“一带一路”沿线国家股票市场具有良好的样本内和样本外可预测性。进一步研究发现,国际油价波动对产油国和非产油国股票市场的影响存在非对称性。本文为国际油价冲击股票市场提供了新的有力证据,同时本文研究成果提示了油价风险,对维持我国股票市场稳定,保持金融稳定具有一定意义。     

The dynamic moderating function of the exchange rate market on the oil-stock nexus

Oil price movements have an important impact on the stock market, and this impact could be dynamically moderated by the exchange rate, which could not be effectively depicted by VAR or GARCH methods widely used in previous studies. This paper adopts a more flexible nonlinear model to investigates this dynamic moderating effect of the exchange rate market on the oil-stock nexus for 45 major countries from November 30, 2005 to November 22, 2019. We also compare the differences in this moderating effect between oil-importing and oil-exporting countries and confirm the presence of a wealth transfer effect. Specifically, the empirical results show that (1) In the stage where domestic currency depreciation or appreciation degree is not serious (the growth rate is less than 0.1), an increase in crude oil prices has a positive impact on stock market returns, and this positive impact is weakened when the growth rate of the exchange rate return approaches zero. (2) As the local currency continues to appreciate (the growth rate is greater than about 0.22), the increase in crude oil prices may negatively influence stock market returns to an increasingly greater extent among crude oil importers. (3) The increase in crude oil prices may have a short-term positive impact on stock market returns in oil-exporting countries due to the wealth transfer effect when the domestic currency appreciates at a faster rate. Finally, we discuss the policy implications of our findings to help investors avoid risks due to fluctuations in international oil prices.     

The Impact of Oil Price Shocks on the Returns in China’s Stock Market

The main goal of this paper is to study the relationship between oil price shocks and mainland China’s stock market. From empirical study, we have found that the impact of oil price shocks on stock prices in China has been mixed. In contrast to the conventional wisdom that higher oil prices may cause lower stock prices, positive shocks to oil-market-specific demand resulted in both higher real oil prices and higher stock prices, which helps explain the boom of the Chinese stock market as oil prices were increasing in 2007. However, global oil demand and supply shocks had no significant effects.     

Oil Price and Stock Market Synchronization in Gulf Cooperation Council Countries

Knowing that the Gulf Cooperation Council (GCC) economies are dichotomous in nature, and growth in the non-oil sector is tributary to the oil sector, we document the extent of synchronization between crude oil prices and stock markets for each of the GCC markets and for the GCC as an economic bloc. We use both the bivariate and multivariate nonparametric synchronicity measures proposed by Mink et al. (2007) to assess that linkage. We find a low to mild (mild to strong) degree of synchronization between oil price and stock market returns (volatilities). In a very few instances, we find very strong (above 80 percent) associations between these variables. These results hold irrespective of whether we assume that stock market participants form adaptive or rational expectations about the price of oil. Dynamic factor results confirm that shocks to volatility are more important than shocks to oil price returns for the GCC stock markets.     

Crude oil shocks and African stock markets

In this paper, we investigate the impact of crude oil shocks on selected African stock markets using a Structural Vector Autoregressive model and a two-state regime smooth transition regression framework on monthly data from January 2000 to July 2018. The study is timely given the fast-growing energy sector and stock markets in Africa as well as the place of Africa in international trade. Selected markets are classified into oil-exporting (Nigeria, Tunisia, and Egypt) and oil-importing (Botswana, South Africa, Kenya, and Mauritius). The key findings are as follows: global demand shock does not really matter in oil-importing countries; there is little evidence that oil supply shock affects the real stock return for oil-exporting and oil-importing countries; oil-specific shock is significant for most countries investigated; negative price shocks have more impact than positive price shocks. The findings from this study have important implications for investors whose portfolios may comprise of assets from African stock markets and crude oil. Given the importance of oil in the global market, one would typically avoid equities that suffer from its shock. This study provides the indicators to inform that decision.     

Has Petroleum Pricing Reform in China Achieved Its Objective? An Empirical Study

China’s petroleum pricing reform has started since 1998 and is still ongoing. It has a profound impact on China’s oil market and even global oil market. We quantitatively evaluate the effectiveness of the reform on two key issues. Has the pricing reform strengthened the linkage between the international crude market and China’s petroleum products market? Has the pricing reform magnified shocks to the international crude market on China’s economy? Our results show that the reform has strengthened the relationship between China’s petroleum prices and international crude price without negative influence on China’s economy, but the effect of China’s petroleum prices on international crude price is still limited. Furthermore, the reform helps the Chinese government reduce oil subsidies.     

Oil prices,US stock return,and the dependence between their quantiles

In this article, we examine the relationship between oil prices and US equities by proposing a novel quantile-on-quantile (QQ) approach to construct estimates of the effect that the quantiles of oil price shocks have on the quantiles of the US stock return. This approach captures the dependence between the distributions of oil price shocks and the US stock return and uncovers two nuance features in the oil–stock relationship. First, large, negative oil price shocks (i.e. low oil price shock quantiles) can affect US equities positively when the US market is performing well (i.e. at high US return quantiles). Second, while negative oil price shocks could affect the US stock market, the influence of positive oil price shocks is weak, which suggests that the relationship between oil prices on the US equities is asymmetric.     

基于Copula函数的国际原油价格与股票市场收益的相关性研究

针对国际原油价格与金砖五国股票市场收益之间的相关性问题,使用 AR(p)-GARCH(1,1)-Copula 模型进行检验。运用广义误差分布(GED)获取收益残差序列,对 WTI 原油价格和金砖五国股市收益之间的相关性进行实证分析。研究结果表明,国际原油价格与中国股市收益呈现微弱的相关关系,而与其他四国股市收益的相关关系较为明显。用时变 SJC Copula 模型刻画国际原油价格与金砖五国股票市场收益的相关性最为合适。     

China,Japan and the US Stock Markets and the Global Financial Crisis

In this paper, while focusing on the impact that the global financial crisis had on the stock markets of China, Japan, and the United States, the stock-price volatilities and linkage between these three countries are analyzed. In addition, the relationships between macroeconomic variables (real-economy variables and monetary-policy variables) and stock price volatility in each country are investigated. The estimation results of the EGARCH model revealed that although China’s stock price volatility was far greater than those of Japanese and US stock prices, China was less affected by the global financial crisis in 2007 than Japan and the United States. For China, stock price volatility was greater in the early 1990s, shortly after the stock market had been established, than in 2007 when the global financial crisis occurred. Furthermore, it has been revealed that the linkage of Chinese, Japanese, and US stock prices has increased since the global financial crisis. Moreover, Granger causality testing revealed China’s real-economy variables and monetary-policy variables do not affect China’s stock price volatility.     

The impact of monetary policy shocks on stock prices: Evidence from Canada and the United States

Using structural VAR models with short-run restrictions appropriate for Canada and the United States, we empirically examine whether trade and financial market openness matter for the impact on and transmission to stock prices of monetary policy shocks. We find that, in Canada, the immediate response of stock prices to a domestic contractionary monetary policy shock is small and the dynamic response is brief, whereas in the United States, the immediate response of stock prices to a similar shock is relatively large and the dynamic response is relatively prolonged. We find that these differences are largely driven by differences in financial market openness and hence different dynamic responses of monetary policy shocks between the two countries that we model in this paper.     

石油价格变动对价格总水平的影响分析

石油是最重要的战略资源之一,其价格变动对价格总水平和经济运行有着重要的影响。本文在阐述石油价格变动影响价格总水平的机理和途径的基础上,从投入产出的角度分析石油价格变动对各产业产品价格及价格总水平的具体影响,并通过分析石油价格与价格总水平变动的历史规律来进一步探讨二者之间影响的数量关系。     

Does short selling improve stock price efficiency and liquidity? Evidence from a natural experiment in China

China introduced short selling for designated stocks in March 2010. Using this important policy change as a natural experiment, we examine the effect of short selling on stock price efficiency and liquidity. We show that the introduction of short selling significantly improves price efficiency, as measured by the differences in individual stock responses to market returns and the delay in price adjustments. Short selling also enhances stock liquidity, as measured by bid-ask spread and Amihud [2002. ‘Illiquidity and Stock Returns: Cross-section and Time-series Effects.’ Journal of Financial Markets 5: 31–56] illiquidity measure; and reduces stock volatility. Overall, our results suggest that short selling helps to stabilize asset prices, provides additional liquidity and improves market quality, even in an emerging economy with a less developed stock market than that in the US and Europe.     

The dynamics of economic growth,oil prices,stock market depth,and other macroeconomic variables: Evidence from the G-20 countries

This paper examines the linkages between economic growth, oil prices, depth in the stock market, and three other key macroeconomic indicators: real effective exchange rate, inflation rate, and real rate of interest. We employ a panel vector autoregressive model to test Granger causality for the G-20 countries over the period 1961–2012. A novel approach to this study is that we clearly demarcate the long-run and short-run relations between the economic variables. The results show a robust long-run economic relationship between economic growth, oil prices, stock market depth, real effective exchange rate, inflation rate, and real rate of interest. In the long run, real economic growth is found to respond to any deviation in the long-run equilibrium relationship that is found to exist between the different measures of stock market depth, oil prices, and the other macroeconomic variables. In the short run we find a complex network of causal relationships between the variables. While the empirical evidence of short-run causality is mixed, there is clear evidence that real economic growth responds to various measures of stock market depth, allowing for real oil price movements and changes in the real effective exchange rate, inflation rate, and real rate of interest.     

Oil and stock market activity when prices go up and down: the case of the oil and gas industry

We examine the asymmetric effects of daily oil price changes on equity returns, market betas, oil betas, return variances, and trading volumes for the US oil and gas industry. The responses of stock returns associated with negative changes in oil prices are higher than that associated with positive changes in oil prices. Stock risk measured by market beta is influenced more due to oil price decreases than due to oil price increases. On the other hand, oil risk exposures (oil betas) and return variances are more influenced by oil price increases than oil price decreases. The results of our study indicate that oil and gas firm returns, market betas, oil betas, return variances respond asymmetrically to oil price changes. We also find that relative changes in oil prices along with firm-specific factors such as firm size, ROA, leverage, market-to-book ratio (MBR) are important in determining the effects of oil price changes on oil and gas firms’ returns, risks, and trading volumes.     

Striking oil: Another puzzle?

Changes in oil prices predict stock market returns worldwide. We find significant predictability in both developed and emerging markets. These results cannot be explained by time-varying risk premia as oil price changes also significantly predict negative excess returns. Investors seem to underreact to information in the price of oil. A rise in oil prices drastically lowers future stock returns. Consistent with the hypothesis of a delayed reaction by investors, the relation between monthly stock returns and lagged monthly oil price changes strengthens once we introduce lags of several trading days between monthly stock returns and lagged monthly oil price changes.     

Time-varying impacts of demand and supply oil shocks on correlations between crude oil prices and stock markets indices

This paper investigates the time-varying impacts of demand and supply oil shocks on correlations between changes in crude oil prices and stock markets returns. The findings, obtained by means of a DCC-GARCH from June 2006 to June 2016, indicate that demand shocks positively affected the correlations between crude oil prices and stock market returns from late 2007 to mid-2008, during the apex of the financial markets volatility; from early 2009 to mid-2013, during global economy recovery from the financial crisis; and after 2015, when uncertainties about the Chinese growth and the US economy upturning arose. The dynamic conditional correlation, obtained after the removal of demand shocks effects, presented an average value of 0.13 when all economy sectors were considered and of 0.03 when the energy sector returns were excluded from the stock index. These correlations, still positive on average, suggest that exogenous supply oil shocks had little impact on US mainly enterprises cash flows over the last 10 years. Exceptions are the periods from 2006 to financial crisis and from 2014 until April 2016, when significant and unpredicted changes in oil market happened, considerably affecting the value of the main US companies.     

美元贬值和石油价格变动相关性的实证分析

进入新世纪以来,由于各种因素导致美元不断贬值,与此形成鲜明对比的是,石油价格一路飙升。那么,美元汇率和石油价格之间是否存在着某种因果关系呢?由于期货市场具有价格发现功能。本文以最具代表性的美国纽约商品交易所的原油期货价格为研究对象,分析美元贬值和石油价格之间的关系。本文首先定性分析美元贬值导致石油价格上涨的传导机制,然后利用模型对相关数据进行实证分析。研究结果表明,石油期货价格的上涨,除了有美元指数的影响之外,更重要的原因是前期石油期货价格上涨对本期石油期货价格上涨有正向的推动作用。     

Oil prices and economic policy uncertainty: Evidence from global,oil importers,and exporters’ perspective

Containing various information, economic policy uncertainty reflects significant rises and declines when facing shocks like financial crisis, oil-price change, and other specific economic or policy events. This paper empirically studies the interaction between oil prices and the newly formulated economic policy uncertainty indices using a time-varying parameter vector autoregression framework. Generally, the results of this study suggest that economic policy uncertainty reveals fluctuating responses to oil price shocks, while the oil price has a negative response to the uncertainty. The findings also reveal that the economic policy uncertainty indices for oil-importers and oil-exporters respond to oil price shocks differently. The oil price shock has a larger fluctuation to the economic policy uncertainty of oil-exporters than that of importers. Moreover, for the oil-exporters, the negative response to the oil price shock is greater than that of the oil-importing countries. This paper also discusses the impact of asymmetric shocks of oil price on economic policy uncertainty. In particular, after two financial crises, positive shocks decrease the uncertainty and vice versa. These findings are robustly verified.     

国际金融市场与国际原油期货市场溢出效应实证检验——基于VAR-BEKK模型的分析

文章通过构建VAR模型和BEKK模型对道琼斯股票市场、美元/欧元汇率市场与国际原油期货市场的动态关系进行了实证检验。结果表明：道琼斯股票市场与WTI原油期货市场存在双向的价格溢出效应,以及前者向后者的单向波动溢出效应;美元/欧元汇率市场存在向WTI原油期货市场单向的价格溢出效应和波动溢出效应。所以,国际原油期货市场与国际金融市场联系紧密,国际原油的金融属性日益体现,其价格变动更多受外部国际金融市场风险影响。