Markov Switching Oil Price Uncertainty

20 Pages Posted: 2 Jun 2020

See all articles by Apostolos Serletis

Apostolos Serletis

University of Calgary - Department of Economics

Libo Xu

University of San Francisco - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2019

Abstract

We investigate whether the United States economy responds negatively to oil price uncertainty and whether oil price shocks exert asymmetric effects on economic activity. In doing so, we relax the assumption in the existing literature that the data are governed by a single process, modifying the Elder and Serletis (2010) bivariate structural GARCH‐in‐Mean VAR to accommodate Markov regime switching in order to account for changing oil price dynamics over the sample period. We find evidence of asymmetries, against those macroeconomic theories that predict symmetries in the relationship between real aggregate economic activity and the real price of oil.

Suggested Citation

Serletis, Apostolos and Xu, Libo, Markov Switching Oil Price Uncertainty (October 2019). Oxford Bulletin of Economics and Statistics, Vol. 81, Issue 5, pp. 1045-1064, 2019, Available at SSRN: https://ssrn.com/abstract=3615216 or http://dx.doi.org/10.1111/obes.12300

Apostolos Serletis (Contact Author)

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
403 220-4091 (Phone)
403 282-5262 (Fax)

Libo Xu

University of San Francisco - Department of Economics ( email )

2130 Fulton Street
San Francisco, CA 94117-1080
United States

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