Abstract
We examine the relationship between oil prices and economic policy uncertainty in G7 countries. To do so, we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time-varying functional forms. We also estimate country-specific and common trend functions allowing them to evolve over time. Using monthly data from G7 countries over the period 1997:01–2018:06, we find that the effect of oil prices on economic policy uncertainty is time-varying. Our results show that the estimated time-varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand. Further, our nonparametric local linear estimates show that the country-specific and common trend functions are increasing over time. Our findings are robust to endogeneity and alternative specifications.
| Original language | English |
|---|---|
| Pages (from-to) | 40-51 |
| Number of pages | 12 |
| Journal | Energy Economics |
| Volume | 83 |
| DOIs | |
| Publication status | Published - Sep 2019 |
Keywords
- Economic policy uncertainty
- Nonparametric panel data
- Oil prices
- Time-varying coefficient function
Cite this
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Oil prices and economic policy uncertainty : evidence from a nonparametric panel data model. / Hailemariam, Abebe; Smyth, Russell; Zhang, Xibin.
In: Energy Economics, Vol. 83, 09.2019, p. 40-51.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Oil prices and economic policy uncertainty
T2 - evidence from a nonparametric panel data model
AU - Hailemariam, Abebe
AU - Smyth, Russell
AU - Zhang, Xibin
PY - 2019/9
Y1 - 2019/9
N2 - We examine the relationship between oil prices and economic policy uncertainty in G7 countries. To do so, we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time-varying functional forms. We also estimate country-specific and common trend functions allowing them to evolve over time. Using monthly data from G7 countries over the period 1997:01–2018:06, we find that the effect of oil prices on economic policy uncertainty is time-varying. Our results show that the estimated time-varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand. Further, our nonparametric local linear estimates show that the country-specific and common trend functions are increasing over time. Our findings are robust to endogeneity and alternative specifications.
AB - We examine the relationship between oil prices and economic policy uncertainty in G7 countries. To do so, we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time-varying functional forms. We also estimate country-specific and common trend functions allowing them to evolve over time. Using monthly data from G7 countries over the period 1997:01–2018:06, we find that the effect of oil prices on economic policy uncertainty is time-varying. Our results show that the estimated time-varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand. Further, our nonparametric local linear estimates show that the country-specific and common trend functions are increasing over time. Our findings are robust to endogeneity and alternative specifications.
KW - Economic policy uncertainty
KW - Nonparametric panel data
KW - Oil prices
KW - Time-varying coefficient function
UR - http://www.scopus.com/inward/record.url?scp=85068555274&partnerID=8YFLogxK
U2 - 10.1016/j.eneco.2019.06.010
DO - 10.1016/j.eneco.2019.06.010
M3 - Article
VL - 83
SP - 40
EP - 51
JO - Energy Economics
JF - Energy Economics
SN - 0140-9883
ER -