Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/243634 
Year of Publication: 
2019
Citation: 
[Journal:] Energy Reports [ISSN:] 2352-4847 [Volume:] 5 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2019 [Pages:] 866-873
Publisher: 
Elsevier, Amsterdam
Abstract: 
Economic policy uncertainty (EPU) has important implications for crude oil market. To explore the implications, this paper investigates the impact of EPU on the crude oil return volatility and which EPU index has the most forecasting power in crude oil market. To this end, we employ the GARCH-MIDAS model which can incorporate lower frequency EPU index variable with higher frequency crude oil return variable effectively. We find that EPU has a positive and significant impact on the crude oil return volatility, but the effect is short-lived and the decay period is about one year. Particularly, our results show that the US EPU index has the best forecasting power for crude oil return volatility over the long-term, whereas China EPU index has the best forecasting performance in the past one year. Our findings have important implications on risk management for investors in crude oil market.
Subjects: 
Crude-oil return volatility
Economic policy uncertainty
EPU index
GARCH-MIDAS
JEL: 
C32
C58
E32
Q41
Q47
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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