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Can oil prices affect economic uncertainty and financial stress? Quantile-based evidence from France and Germany

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  • Muhammad Luqman

    (University of Jinan)

  • Yafei Li

    (China Agricultural University)

Abstract

This study investigates the impact of oil prices on financial stress and economic policy uncertainty using the Quantile Autoregressive Distributed Lag (QARDL) model with monthly data from July 2007 to July 2022. This study utilizes the two latest indices of financial stress and economic policy uncertainty to evaluate their impacts on crude oil prices, which have yet to be investigated in the case of France and Germany. The findings reveal that oil prices significantly influence financial stress and economic policy uncertainty, with the effects being exacerbated before and after COVID-19. Oil prices had a positive and significant impact on financial stress in both countries, with the impact being more pronounced in Germany. Additionally, oil prices have a positive association with economic policy uncertainty, particularly within the lower quantiles of both France and Germany. This study highlights the importance of understanding the complex relationships among oil prices, economic policy uncertainty, and financial stress, especially in the context of the non-financial sector and its connection to financial stability. The results provide valuable insights for policymakers to balance economic growth with environmental sustainability and manage the impact of oil price fluctuations on financial stress and economic policy uncertainty in these influential European economies.

Suggested Citation

  • Muhammad Luqman & Yafei Li, 2024. "Can oil prices affect economic uncertainty and financial stress? Quantile-based evidence from France and Germany," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-23, December.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:6:d:10.1007_s10644-024-09812-9
    DOI: 10.1007/s10644-024-09812-9
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