Dynamic causality interplay from COVID-19 pandemic to oil price, stock market, and economic policy uncertainty: evidence from oil-importing and oil-exporting countries. (English) Zbl 1494.91142
Summary: In this study we examine the time-varying causal effect of the novel COVID-19 pandemic in the major oil-importing and oil-exporting countries on the oil price changes, stock market volatilities and the economic uncertainty using the wavelet coherence and network analysis. During the period of the pandemic, we explore such relationship by resorting to the wavelet coherence and Gaussian graphical model (GGM) frameworks. Wavelet analysis enables us to measure the dynamics of the causal effect of the novel covid-19 pandemic in the time-frequency space. Regarding the findings displayed herein, we first found that the COVID-19 pandemic has a severe influence on oil prices, stock market indices, and the economic uncertainty. Second the intensity of the causality effect is stronger in the longer horizon than in the short ones, suggesting that the causality exercise continues. Our findings also provide evidence that the COVID-19 pandemic and oil price changes in oil-importing countries mirror those in oil-exporting countries and vice versa. Further, the COVID-19 pandemic has a profound immediate time-frequency effect on the US, Japanese, South Korean, Indian, and Canadian economic uncertainties. A better understanding of oil and stock market prices in the oil-importing and oil-exporting countries is vital for investors and policymakers, specially since the novel unprecedented COVID-19 crisis has been recognized among the most serious ever happened. Thus, the findings suggest that the authorities should strongly take efficient actions to minimize risk.
MSC:
| 91G15 | Financial markets |
| 91G45 | Financial networks (including contagion, systemic risk, regulation) |
| 42C40 | Nontrigonometric harmonic analysis involving wavelets and other special systems |
Keywords:
COVID-19; oil price; stocks; economic uncertainty; wavelet analysis; Gaussian graphical model; value-at-riskSoftware:
glassoReferences:
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