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Terrorist attacks and oil prices: A time-varying causal relationship analysis

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  • Song, Yu
  • Chen, Bo
  • Hou, Na
  • Yang, Yi

Abstract

This study investigates the time-varying interaction between terrorist attacks and oil prices using a bootstrap full-sample causality test and sub-sample rolling window estimations. The results show that terrorist incidents (defined by the occurrence of an attack) and the associated brutality (measured by the number of casualties produced by the attack) may be important factors in explaining changes in oil prices, but their effects differ. Terrorist incidents have both positive and negative time-varying effects on oil prices, but terrorist brutality has only negative effects, and its impact is far less than for terrorist incidents. In contrast, there is weak evidence that terrorist attacks respond in a significant manner to oil prices. Terrorist attacks depend on the long-term influences of various complex factors and the importance of short-term changes in oil prices is negligible. Our research may be helpful to market participants in analyzing and predicting the results of terrorism on oil prices, which has great significance for investment decision-making and risk-avoidance strategies in the oil markets.

Suggested Citation

  • Song, Yu & Chen, Bo & Hou, Na & Yang, Yi, 2022. "Terrorist attacks and oil prices: A time-varying causal relationship analysis," Energy, Elsevier, vol. 246(C).
    • Handle: RePEc:eee:energy:v:246:y:2022:i:c:s0360544222002432
    DOI: 10.1016/j.energy.2022.123340
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    Cited by:

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    2. Wenlong Yang & Wentian Shi & Dongcheng Chen, 2024. "Unveiling the nexus: exploring the influence of terrorism on energy trade in China and the Belt and Road countries," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-16, December.
    3. Sun, Huiqian & Jing, Peng & Wang, Baihui & Cai, Yunhao & Ye, Jie & Wang, Bichen, 2023. "The effect of record-high gasoline prices on the consumers’ new energy vehicle purchase intention: Evidence from the uniform experimental design," Energy Policy, Elsevier, vol. 175(C).
    4. Chen, Zhuoyi & Liu, Yuanyuan & Zhang, Hongwei, 2024. "Can geopolitical risks impact the long-run correlation between crude oil and clean energy markets? Evidence from a regime-switching analysis," Renewable Energy, Elsevier, vol. 229(C).
    5. Xiao, Jihong & Wen, Fenghua & He, Zhifang, 2023. "Impact of geopolitical risks on investor attention and speculation in the oil market: Evidence from nonlinear and time-varying analysis," Energy, Elsevier, vol. 267(C).

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    More about this item

    Keywords

    Terrorist incident; Terrorist brutality; Oil price; Time-varying;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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