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HOW DO INTERNATIONAL STOCK MARKETS RESPOND TO OIL DEMAND AND SUPPLY SHOCKS?

Published online by Cambridge University Press:  07 June 2013

Jochen H. F. Güntner
Jochen H. F. Güntner*
Affiliation:
Johannes Kepler University Linz
*
Address correspondence to: Jochen Güntner, Department of Economics, Johannes Kepler University Linz, Altenberger Straße 69, 4040 Linz, Austria; e-mail: [email protected].
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Abstract

Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper focuses on the differences and commonalities of stock price responses in oil exporting and importing economies in 1974–2011. Structural oil price shocks add to our understanding of the 2008 stock market crash. I find that unexpected reductions in world oil supply do not affect stock returns in any of six OECD countries. Although an increase in global aggregate demand consistently raises oil prices and cumulative real stock returns, the effect is more persistent for oil exporters. Other, e.g., precautionary oil demand shocks have a detrimental impact on stock markets in oil-importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil price shocks account for a larger share of the variation in aggregate international stock returns than in national stock returns.

Keywords

Net Oil ExportersOil Price ShocksStock Market ReturnsStructural VAR Estimation
Type
Articles
Information
Macroeconomic Dynamics , Volume 18 , Issue 8 , December 2014 , pp. 1657 - 1682
Copyright
Copyright © Cambridge University Press 2013 

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