- Title
- Supply and demand driven oil price changes and their non-linear impact on precious metal returns: a Markov regime switching approach
- Creator
- Uddin, Gazi Salah; Rahman, Md Lutfur; Shahzad, Syed Jawad Hussain; Rehman, Mobeen Ur
- Relation
- Energy Economics Vol. 73, Issue June 2018, p. 108-121
- Publisher Link
- http://dx.doi.org/10.1016/j.eneco.2018.05.024
- Publisher
- Elsevier
- Resource Type
- journal article
- Date
- 2018
- Description
- This paper examines the nonlinear effect of oil price shocks on precious metal returns using Markov regime switching regression. We use Ready's (2018) approach to decompose oil price changes into supply, demand, and risk driven shocks. Results indicate a significant positive impact of demand and supply shocks and a negative impact of risk shocks on precious metal returns. Although we find evidence of switching between low and high volatility regimes, we do not find strong regime effect on supply or demand shocks' contemporaneous relationship with precious metal returns. However, risk shocks' influence on precious metal returns is strongly regime dependent. These results generally hold for different distributional specification of error terms.
- Subject
- oil; precious metal; demand and supply shocks; VAR; Markov regime switching regression
- Identifier
- http://hdl.handle.net/1959.13/1389125
- Identifier
- uon:32854
- Identifier
- ISSN:0140-9883
- Rights
- © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/.
- Language
- eng
- Full Text
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