The Effects of COVID-19 Pandemic on Oil Prices, CO 2 Emissions and the Stock Market: Evidence from a VAR Model

8 Pages Posted: 29 Apr 2020 Last revised: 19 May 2020

See all articles by Hela Mzoughi

Hela Mzoughi

University of Tunis Carthage-Carthage Business School; ISG Sousse

Christian Urom

PSB Paris School of Business

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division

Khaled Guesmi

PSB Paris School of Business - Center of Research for Energy and Climate Change

Date Written: May 19, 2020

Abstract

This paper examines the impact of COVID-19 pandemic on oil prices, CO2 emissions and stock market volatility over the period January 22, 2020 – March 30, 2020 using an unrestricted VAR. We demonstrate that although the increasing number of COVID-19 infections causeda decrease in the price of crude oil, the negative response of the oil market is short-lived.However, the response of economic activities as measured by CO2 emissions to a shock on COVID-19 infections is negative throughout the forecast period. Also, we find that the current situation created by COVID-19 led appears to have had a stronger impact on equity market volatility than on crude oil prices and CO2 emissions. Lastly, we find that the share of forecast error variance in the level of CO2 emissions is stronger than that of the energy and stock markets. Taken together, our findings shed light on the need for economic intervention to speed up recovery and boost investor’ perception of long-term growth.

Keywords: Oil price; COVID-19; CO2 emissions; financial volatility; VIX

JEL Classification: G1; Q2; Q4

Suggested Citation

Mzoughi, Hela and Urom, Christian and Uddin, Gazi Salah and Guesmi, Khaled, The Effects of COVID-19 Pandemic on Oil Prices, CO 2 Emissions and the Stock Market: Evidence from a VAR Model (May 19, 2020). Available at SSRN: https://ssrn.com/abstract=3587906 or http://dx.doi.org/10.2139/ssrn.3587906

Hela Mzoughi

University of Tunis Carthage-Carthage Business School ( email )

Avenu Fattouma Bourguiba
Tunis, Tunis 2036
Tunisia

ISG Sousse ( email )

Sousse
Tunisia

Christian Urom (Contact Author)

PSB Paris School of Business ( email )

59 rue Nationale
Paris, 75013
France

Gazi Salah Uddin

Linkoping University - Department of Management and Engineering Division ( email )

Linköping, 581 83
Sweden

Khaled Guesmi

PSB Paris School of Business - Center of Research for Energy and Climate Change ( email )

France

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