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Dynamics of crude oil price shocks and major Latin American Equity Markets: A study in time and frequency domains.

Dynamics of crude oil price shocks and major Latin American Equity Markets: A study in time and frequency domains.

Authors :
Adrangi, Bahram
Chatrath, Arjun
Macri, Joseph
Raffiee, Kambiz
Source :
Bulletin of Economic Research; Jul2021, Vol. 73 Issue 3, p432-455, 24p, 4 Charts, 5 Graphs
Publication Year :
2021

Abstract

We examine the impact of crude oil price fluctuations on equity markets for four emerging Latin American markets, namely, Argentina, Brazil, Chile, and Mexico. We adopt an approach that examines this relationship in both a time and frequency domains. The co‐spectral analysis confirmed that most of the observable coherence between crude oil and equity returns occurred at relatively short frequencies. The structural vector autoregression (SVAR) results suggest that shocks to crude oil price directed all equity markets into negative territory, though they typically reversed course after approximately twenty‐four months. Although the decomposition of the prediction error variance showed that crude oil prices were weakly exogenous in the SVAR model, in most cases Brazil's equity market may have been responsible for the higher percentage of variations in the remaining indices. The nonlinear Granger causality tests reveal, with the exception of the Merval index, the equity markets under study were responsive to crude oil price shocks. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
03073378
Volume :
73
Issue :
3
Database :
Complementary Index
Journal :
Bulletin of Economic Research
Publication Type :
Academic Journal
Accession number :
151353270
Full Text :
https://doi.org/10.1111/boer.12258