The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US

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2020-02-01

Author

Kocaarslan, Baris
SOYTAŞ, MEHMET ALİ
Soytaş, Uğur

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In this study, we investigate the presence of asymmetric interactions between oil prices, oil price uncertainty, interest rates, and unemployment in a cointegration framework. Utilizing the nonlinear auto-regressive distributed lag (NARDL) approach, we show the asymmetric responses of unemployment to changes in oil prices, oil price uncertainty and interest rates in the long-run. More specifically, the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices. On the one hand, reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact. We also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant. Last but not least, we find that option-implied oil price volatility, as a measure of oil price uncertainty, outperforms the conditional volatility of crude oil prices in predicting unemployment. This study provides valuable implications for policymakers to design sound economic policies.

Subject Keywords

General Energy, Economics and Econometrics

URI

https://hdl.handle.net/11511/35503

Journal

ENERGY ECONOMICS

DOI

https://doi.org/10.1016/j.eneco.2019.104625

Collections

Department of Business Administration, Article

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Citation Formats

B. Kocaarslan, M. A. SOYTAŞ, and U. Soytaş, “The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US,” ENERGY ECONOMICS, pp. 0–0, 2020, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/35503.