The Unassuming Economist

From a paper by Jassim Aladwani:

“Using standard GARCH-type, Markov Switching GARCH-type, and autoregressive distributed lag (ARDL) models, this study employs quarterly dataset from 1995 to 2023 to investigate the volatility shifts of macroeconomic variables, incorporating crude oil prices in Spain. The empirical results of the study clearly confirm that MSGARCH-type models extend beyond the capabilities of standard GARCH-type models, providing enhanced flexibility in modeling the volatility process. The estimated MSGARCH-type models effectively identify breakpoints in all macroeconomic variables volatilities, specifically during significant events such as the global financial crisis (GFC) in 2008, the European debt crisis in 2011, and the Covid-19 pandemic of 2020, Russia-Ukraine War in 2022. In addition, our results indicate that high crude oil price shocks during the global events are important drivers of uncertainty. There is strong evidence that the effects of crude oil price shocks on macroeconomic uncertainty are highly dependent on the prevailing regime. These impacts vary based on investor sentiment and the level of perceived volatility within financial markets. The responses of economic uncertainty to crude oil shocks appear to experience a dramatic change in the major global events, such as the post-global financial crisis (GFC), COVID-19 pandemic, and the Russia-Ukrainian war.”

From a paper by Markus Brueckner, Gabriele Ciminelli, and Norman Loayza:

“We examine the relationship between oil revenue shocks and labor market regulation empirically in a sample of 83 economies spanning 1970–2014. We find that oil revenue gains lead to a deregulation of the labor market in autocracies but have no effects in democracies. Oil revenue losses instead cause a sizeable deregulation in democracies but have limited effects in autocracies. We then consider possible transmission channels. Democracies appear to use the rents stemming from a positive oil revenue shock to increase government expenditures. Rent extraction and economic efficiency considerations are instead both plausible deregulation drivers following oil revenue gains in autocracies, as expenditures are not raised, while gross domestic product and employment gradually increase. Finally, the deregulation following oil revenue losses in democracies is consistent with the crisis-induced-reform hypothesis, as such losses deteriorate the current account and budget balances and increase the probability of a systemic banking crisis.”

From a paper by Seyed Kamal Sadeghi , and Obaida Amer Khudhair:

“Inflation is one of the challenging and vital issues of economics that undeniably affects economic stability in countries all over the world. For this reason, many researchers and policymakers have always sought to identify factors affecting inflation. In the meantime, oil price, as one of the global and strategic variables, can have a significant effect on inflation, especially in countries dependent on oil revenues, such as Iran. Accordingly, considering the importance of inflation and the need to identify the causes and factors affecting it on the one hand and the prominent role of supply-side factors on the other hand, this study aims to investigate the effect of oil price fluctuations on the inflation rate considering the threshold effect of economic growth. To identify the other supply-side factors affecting the inflation rate, including technology and labor market dynamics during 1375-1401, this research applied the threshold regression of time series. According to the results, the oil price has a positive and significant effect on the inflation rate when economic growth is lower than 4.303%. This effect is also positive and significant in the economic growth above the mentioned threshold, but its amount is less. In addition, unemployment and technology have negative and significant effects on the inflation rate, which respectively confirms Phillips’s theory and Solow growth theory. However, population size has a positive and significant effect on the inflation rate.”

From a paper by Jorge Alvarez, and Thomas Kroen:

“This paper investigates the relationship between energy prices and inflation dynamics in the
context of the global inflation surge during the COVID-19 pandemic. Using a comprehensive sector-level
dataset covering over 30 countries and a local projections empirical strategy, we extend previous studies that primarily focused on single-country analyses or aggregate inflation measures. Our findings indicate that while the energy shocks of 2021–2022 were remarkable, the degree of inflation passthrough of energy shocks appears to be relatively stable over time. Moreover, we show that energy price shocks significantly influence inflation through stable sectoral channels, with structural characteristics such as energy dependence and price flexibility playing critical roles in the passthrough mechanism. These results underscore the necessity of a sectoral perspective in understanding inflationary pressures and highlight the importance of detailed data on price-setting mechanisms and intersectoral connectivity in understanding the energy-inflation passthrough.”

From a paper by Afees A. Salisu, Rangan Gupta, and Riza Demirer:

“This paper examines the propagation of oil price uncertainty shocks to real equity prices using a large-scale Global Vector Autoregressive (GVAR) model of 26 advanced and emerging stock markets. The GVAR framework allows us to capture the transmission of local and global shocks, while simultaneously accounting for individual-country peculiarities. Utilising a recently developed model-free, robust estimate of oil price uncertainty, we document a statistically significant and negative effect of uncertainty shocks emanating from oil prices on the large majority of global stock markets, with the adverse effect of oil price uncertainty shocks found to be stronger for emerging economies as well as net oil-exporting nations. Interestingly, however, global stock markets exhibit a great deal of heterogeneity in their recovery following oil uncertainty shocks as some experience rapid corrections in stock valuations while others suffer from extended slumps. While the results are sensitive to the oil uncertainty measure utilised, they suggest that country diversification in the face of rising oil market uncertainty can still be beneficial for global investors as global stock markets exhibit a rather heterogeneous pattern in their recovery rates against oil market shocks.”