Esti Tri Widyastuti (University of Aberdeen and

Transcript:Esti Tri Widyastuti (University of Aberdeen and:
Esti Tri Widyastuti (University of Aberdeen and Curtin University) Marc Gronwald (Xi'an Jiaotong-Liverpool University, CESifo, and ifo Institute) How to measure oil market uncertainty? An application of Google Trends The 2021 IAEE Online Conference 08 June 2021 About Oil volatility index/OVX (CBOE 2021): expected 30-day crude oil volatility index Jurado et al.'s (2015) macro uncertainty: The forecast of conditional volatility for the macroeconomic activity/business cycle Baker et al.'s (2016) economic policy uncertainty; Davis (2016) global economic policy uncertainty: Newspaper coverage frequency-based; such as “economic”, “uncertainty”, “regulation”, etc. Caldara and Iacoviello (2018) geopolitical risk uncertainty: Newspaper covering geopolitical tension; such as “tensions”, “military”, “geopolitical”, etc. Ahir et al.'s (2019) world uncertainty index: frequency of term ”uncertainty” in quarterly Economist Intelligence Unit country reports. Recent contributions to uncertainty literature Existing uncertainty indices Figure 1. Existing uncertainty benchmark indices Application of Google Trends “What is Google Trends and why do we utilise it?” Castelnuovo and Tran’s (2017) procedure Selection of a set of keywords related to uncertainties about future economic conditions Examples: “bankruptcy”, “financial crisis”, “stock market”, “inflation”, “recession” Aggregating monthly search terms into one index Selection of Benchmark term - restriction to five search terms at a time Resulting index interpreted as uncertainty index Measuring oil market uncertainty Measures capturing different types of oil market uncertainty Oil investment uncertainty (GTU oil investment) “oil investment”, “oil exploration”, “oil project”, “oil drilling” Oil demand uncertainty (GTU oil demand) “recession”, “economic growth”, “global economy”, “industrial production” Oil supply uncertainty (GTU oil supply) “oil supply”, “oil production”, “shale oil”, “OPEC” Benchmark term: “oil price” Worldwide scope Monthly frequency index Oil market specific (GTU oil market specific) Aggregate index of GTU oil investment, GTU oil demand, and GTU oil supply Measuring oil market uncertainty Figure 2. Four oil market uncertainty measures Measuring oil market uncertainty Figure 3. Comparison with existing indices Measuring oil market uncertainty Table 1. Correlation between GTU and the existing uncertainty benchmark indices Measuring oil market uncertainty Figure 5. “GTU oil market specific” and oil price Application: effect on oil market variables Key variables: oil prices and rig counts Crude oil production does not respond to oil price changes Strong relationship between oil prices and rig counts Rig counts are indicator of exploration activity Data overview Figure 6. Global oil market variables a. World rig counts b. Crude oil price Empirical framework Monthly data, January 2004 – May 2021 VAR model Endogenous variables: oil