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Energy Commodity Price Response to COVID-19: Impact of Epidemic Status, Government Policy, and Stock Market Volatility

Author

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  • Katarzyna Czech

    (Department of Econometrics and Statistics, Institute of Economics and Finance, Warsaw University of Life Sciences SGGW, Warsaw, Poland,)

  • Michal Wielechowski

    (Department of Economics and Economic Policy, Institute of Economics and Finance, Warsaw University of Life Sciences SGGW, Warsaw, Poland.)

Abstract

The outbreak of the COVID-19 pandemic has hit the global financial markets, including energy commodities. The aim of the paper is to examine the reaction of the energy commodity market to the COVID-19 pandemic, particularly the epidemic status, the stringency of the government anti-COVID-19 policy, and the stock market volatility. We use daily data on the S&P GSCI Energy index, the number of new confirmed COVID-19 global cases, the self-developed Global Stringency Index, and the VIX index. The research covers the period from January 2 to September 30, 2020, i.e. the first phase of the COVID-19 pandemic. Based on a structural vector autoregressive model we observe a significant and negative energy commodity market s reaction to the changes in the stock market volatility. Moreover, the results imply that the increase in the Global Stringency Index leads to the decline in the S&P GSCI Energy index but the reaction is significant only on the third day after the shock. We reveal no significant impact of global epidemic status on energy commodity prices.

Suggested Citation

  • Katarzyna Czech & Michal Wielechowski, 2021. "Energy Commodity Price Response to COVID-19: Impact of Epidemic Status, Government Policy, and Stock Market Volatility," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 443-453.
    • Handle: RePEc:eco:journ2:2021-03-54
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    References listed on IDEAS

    as
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    4. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Filis, George, 2014. "Dynamic spillovers of oil price shocks and economic policy uncertainty," Energy Economics, Elsevier, vol. 44(C), pages 433-447.
    5. Anand, Amber & Irvine, Paul & Puckett, Andy & Venkataraman, Kumar, 2013. "Institutional trading and stock resiliency: Evidence from the 2007–2009 financial crisis," Journal of Financial Economics, Elsevier, vol. 108(3), pages 773-797.
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    Cited by:

    1. Katarzyna Czech & Anna Davy & Michał Wielechowski, 2021. "Does the COVID-19 Pandemic Change Human Mobility Equally Worldwide? Cross-Country Cluster Analysis," Economies, MDPI, vol. 9(4), pages 1-19, November.
    2. Talie Kassamany & Bernard Zgheib, 2023. "Impact of government policy responses of COVID‐19 pandemic on stock market liquidity for Australian companies," Australian Economic Papers, Wiley Blackwell, vol. 62(1), pages 24-46, March.
    3. Arhan Sheth & Tulasi Sushra & Ameya Kshirsagar & Manan Shah, 2022. "Global Economic Impact in Stock and Commodity Markets during Covid-19 pandemic," Annals of Data Science, Springer, vol. 9(5), pages 889-907, October.

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    More about this item

    Keywords

    energy commodities; COVID-19 pandemic; stock market volatility; Global Stringency Index; government anti-COVID-19 policy; structural vector autoregressive model;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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