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Common and Country-Specific Uncertainty Fluctuations in Major Oil-Producing Countries: A Comparative Study

Author

Listed:
  • Selmi, Refk

    (ESC Pau Business School, France)

  • Bouoiyour, Jamal

    (Universite de Pau et des Pays de l’Adour, France , ESC Pau Business School, France)

  • Hammoudeh, Shawkat

    (Drexel University, USA , Institute of Business Research, University of Economics, Vietnam)

Abstract

In the wake of recent political developments worldwide, future oil supply prospects have become doubtful and uncertainty plays a non-negligible role in determining the dynamics of major macroeconomic variables. This study constructs a factor model with time-varying loadings to decompose the variance of important macroeconomic and financial series for the top 10 oil-producing countries into the contributions from country-specific uncertainty and common uncertainty. The relative importance of the uncertainty estimates in explaining volatility in production, investment, total exports, the exchange rate, and stock prices seems to vary over time, with evidence of alternating periods of high and low persistent uncertainty. Global uncertainty plays a primary role output growth, investment, exports, and stock prices in all countries. Globalization and trade openness contribute to amplifying the international transmission of volatility, explaining the increasing importance of the global uncertainty factor.

Suggested Citation

  • Selmi, Refk & Bouoiyour, Jamal & Hammoudeh, Shawkat, 2020. "Common and Country-Specific Uncertainty Fluctuations in Major Oil-Producing Countries: A Comparative Study," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(4), pages 724-750.
    • Handle: RePEc:ris:integr:0815
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    Keywords

    Common uncertainty; country-specific uncertainty; top 10oil-producing countries; dynamic factor model;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • 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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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