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The interdependence of global oil price, China's stock price and economic policy uncertainty

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  • Xue Gao
  • Yixin Ren
  • Xin Li

Abstract

This investigation examines the interaction among global oil price (OP), China's stock price (SP) and China's economic policy uncertainty (EPU) during the period of 2005:01 and 2017:12. A rolling window Toda‐Yamamoto causality method shows a complex time‐varying relationship. Bilateral causalities between these variables mostly accompany by sharp fluctuations in global or China's economy. Taking into account the inherent consistency of this time‐varying relation, the causal steps approach shows EPU follows a partial but time‐varying mediator process during crisis periods, which suggests EPU is one of mediator variables in this transmission mechanism. The mediator role of EPU in the transmission mechanism of OP and SP has not been paid enough attention before. Our findings provide a new direction for investors from the perspective of policy changes to deal with risks caused by OP and SP fluctuations especially when the financial market experiencing huge fluctuations.

Suggested Citation

  • Xue Gao & Yixin Ren & Xin Li, 2019. "The interdependence of global oil price, China's stock price and economic policy uncertainty," Australian Economic Papers, Wiley Blackwell, vol. 58(4), pages 398-415, December.
    • Handle: RePEc:bla:ausecp:v:58:y:2019:i:4:p:398-415
    DOI: 10.1111/1467-8454.12160
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    Cited by:

    1. Liu, Weihua & Wang, Siyu & Lin, Yong & Xie, Dong & Zhang, Jiahui, 2020. "Effect of intelligent logistics policy on shareholder value: Evidence from Chinese logistics companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 137(C).
    2. Paul R. Gregory & Kuangli Kuang, 2020. "How Does Uncertainty in Economic Policy React to Oil Price Shocks in Australia?," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 10(2), pages 42-48.
    3. Zhibing Li & Jia Liu & Jie Liu & Xiaoyu Liu & Yinglun Zhu, 2024. "The causal effect of political risk on the stock market: Evidence from a natural experiment," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 145-162, March.

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