Assessing Dynamic Relationships Between Oil Price, Macroeconomy and Stock Market Returns in the U.S, Canada and China: A Short-run SVAR Approach Open Access

Abstract

Using structural VAR models (SVAR) with contemporaneous restrictions on the U.S., Canada

and China, I empirically examine and compare how oil price, macroeconomy and stock returns

interact across three countries. I find that first of all, a negative oil price shock has no significant

impact on stock market returns. It is contractionary only in the U.S. and raises the Federal Funds

Rate. Secondly, whether a “countercyclical policy” is present in each country depends on the

source of increase in the output level. Also, a rising interest rate only lowers stock returns in the

U.S. and Canada, and the “price puzzle” is found in the U.S. and China. Lastly, a bidirectional

positive relationship between the production level and real equity returns is discovered in the

U.S. and Canada, whereas in China, stock market movements positively contribute to the

production level fluctuations, but not vice versa.

Table of Contents

Table of Contents

Section 1: Introduction……………………………………………………………...........1

Section 2: Literature Review………………………………………………………..........3

Section 3: Short-run Structural Vector Autoregression (SVAR) Model…………7

Section 4: Data, Methodology and SVAR model specification…………………..10

Section 5: Estimation Results and Interpretations………………………………...13

Section 6: Limitations and Potential Improvements……………………………... 21

Section 7: Conclusion……………………………………………………………............24

References…………………………………………………………………………..............25

Appendix…………………………………………………………………………................30

About this Honors Thesis

Rights statement

• Permission granted by the author to include this thesis or dissertation in this repository. All rights reserved by the author. Please contact the author for information regarding the reproduction and use of this thesis or dissertation.

School	Emory College
Department	Economics
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Economics, General Economics, Theory Economics, Finance
Keyword	Identification Impulse Response Functions Advanced Time Series Analysis Financial Markets Structural VAR Oil Price Macroeconomics
Committee Chair / Thesis Advisor	Zhanwei (Vivian) Yue, Emory University
Committee Members	Manuela Manetta, Emory University Kelli Lanier, Emory University Elena Pesavento, Emory University

Last modified

Primary PDF

Thumbnail	Title	Date Uploaded	Actions
	Assessing Dynamic Relationships Between Oil Price, Macroeconomy and Stock Market Returns in the U.S, Canada and China: A Short-run SVAR Approach ()	2019-04-09 09:23:49 -0400	Press to Select an action Download

Supplemental Files

Thumbnail	Title	Date Uploaded	Actions