The Asymmetric Impact of Oil Prices, Interest Rates and Oil Price Uncertainty on Unemployment in US

32 Pages Posted: 11 Nov 2019

See all articles by Barış Kocaarslan

Barış Kocaarslan

Yalova University - Faculty of Economics and Administrative Sciences

Mehmet Soytas

King Fahd University of Petroleum and Minerals; Center for Economics and Econometrics; Global Labor Organization

Ugur Soytas

DTU Management

Date Written: October 31, 2019

Abstract

In this study, we investigate the presence of asymmetric interactions between oil prices, oil price uncertainty, interest rates and unemployment in a cointegration framework. Utilizing the nonlinear auto-regressive distributed lag (NARDL) approach, we show the asymmetric responses of unemployment to changes in oil prices, oil price uncertainty and interest rates in the long-run. More specifically, the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices. On the other hand, reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact. We also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant. Last but not least, we find that option-implied oil price volatility, as a measure of oil price uncertainty, outperforms the conditional volatility of crude oil prices in predicting unemployment. This study provides valuable implications for policymakers to design sound economic policies.

Keywords: Asymmetric effects, Unemployment, Nonlinear ARDL (NARDL), Oil prices, Oil price uncertainty, Interest rates

JEL Classification: C32, E24, G31, Q43

Suggested Citation

Kocaarslan, Barış and Soytas, Mehmet and Soytas, Ugur, The Asymmetric Impact of Oil Prices, Interest Rates and Oil Price Uncertainty on Unemployment in US (October 31, 2019). Available at SSRN: https://ssrn.com/abstract=3478557 or http://dx.doi.org/10.2139/ssrn.3478557

Barış Kocaarslan (Contact Author)

Yalova University - Faculty of Economics and Administrative Sciences ( email )

Yalova, 77200
Turkey

Mehmet Soytas

King Fahd University of Petroleum and Minerals ( email )

United States
0546243550 (Phone)
31262 (Fax)

HOME PAGE: http://https://sites.google.com/view/mehmetalisoytas/

Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

HOME PAGE: http://https://cee.boun.edu.tr/content/mehmet-ali-soyta%C5%9F

Global Labor Organization ( email )

Collogne
Germany

HOME PAGE: http://https://glabor.org/user/mehmets/

Ugur Soytas

DTU Management ( email )

Produktionstorvet 424
Room 020
Kgs. Lyngby, 2800
Denmark

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