Abstract
Geopolitical factors are considered a crucial factor that makes a difference in crude oil prices. Over the last three decades, many political events occurred frequently, causing short-term fluctuations in crude oil prices. This paper aims to examine the dynamic correlation and causal link between geopolitical factors and crude oil prices based on data from June 1987 to February 2020. By using a time-varying copula approach, it is shown that the correlation between geopolitical factors and crude oil prices is strong during periods of political tensions. The GPA (geopolitical acts) index, as the real factor, drives the rise in prices of crude oil. Moreover, the dynamic correlation between geopolitical factors and crude oil prices shows strong volatility over time during periods of political tensions. We also found unidirectional causality running from geopolitical factors to crude oil prices by using the Granger causality test.
| Original language | English |
|---|---|
| Article number | 4277 |
| Pages (from-to) | 1-19 |
| Number of pages | 19 |
| Journal | Energies |
| Volume | 13 |
| Issue number | 16 |
| DOIs | |
| Publication status | Published - 18 Aug 2020 |
Keywords
- GPR index
- time-varying copula
- Granger causality test
- extreme political acts
- dynamic correlation