Oil Market Volatility: Is Macroeconomic Uncertainty Systematically Transmitted to Oil Prices?

  • Marc Joëts
  • Valérie Mignon
  • Tovonony Razafindrabe
Part of the Dynamic Modeling and Econometrics in Economics and Finance book series (DMEF, volume 24)


The aim of this contribution is to analyze the impact of macroeconomic uncertainty on the oil market. We rely on a robust measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators, which is linked to predictability rather than to volatility. We estimate a structural threshold vector autoregressive (TVAR) model to account for the varying effect of macroeconomic uncertainty on oil price returns depending on the degree of uncertainty, from which we derive a robust proxy of oil market uncertainty. Our findings show that a significant component of oil price uncertainty can be explained by macroeconomic uncertainty. In addition, we find that the recent 2007–2009 recession has generated an unprecedented episode of high uncertainty in the oil market that is not necessarily accompanied by a subsequent volatility in the price of oil. This result highlights the relevance of our uncertainty measure in linking uncertainty to predictability rather than to volatility.

JEL Classification

Q02 E32 C32 



This contribution largely relies on Joëts, Mignon, and Razafindrabe (2017). We are grateful to Nathan Balke for providing us with his code for the TVAR estimations. We would like to thank Nick Bloom, Soojin Jo, and Lutz Kilian for their constructive comments and suggestions that helped us improve an earlier version of the work. The usual disclaimers apply.


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Copyright information

© Springer Nature Switzerland AG 2018

Authors and Affiliations

  • Marc Joëts
    • 1
  • Valérie Mignon
    • 2
  • Tovonony Razafindrabe
    • 3
  1. 1.Banque de France, International Macroeconomic Division and EconomiX-CNRSUniversity of Paris NanterreNanterreFrance
  2. 2.EconomiX-CNRSUniversity of Paris Nanterre and CEPIINanterreFrance
  3. 3.EconomiX-CNRS and CREM-CNRSUniversity of Rennes 1RennesFrance

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