2014/08/22 by SOOJIN JO, Soojin Jo · 311 citations
Economics, Econometrics and Finance · Engineering · #Autoregressive model #Crude oil #Econometrics #Economics #Energy, Environment, Economic Growth #Engineering #Implied volatility #Industrial production #Macroeconomics #Market Dynamics and Volatility #Monetary Policy and Economic Impact #Monetary economics #Oil price #Petroleum engineering #Stochastic volatility #Volatility (finance)
paper · doi:10.1111/jmcb.12135
published in Journal of money credit and banking 46(6), 1113-1135 (Wiley)
openalex publication_date 2014/08/22 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
This paper investigates the effect of oil price uncertainty on global real economic activity using a quarterly vector autoregressive model with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and allows one to incorporate an extraneous indicator of oil price uncertainty such as realized volatility that greatly improves the precision of the estimated uncertainty series. The estimation results show that an oil price uncertainty shock has negative effects on world industrial production all else equal. For example, it is shown that a doubling of oil price volatility is associated with a cumulative decline as high as 0.3 percentage points in world industrial production.