Empirical analysis demonstrates varying macroeconomic drivers in West Texas Intermediate oil markets, highlighting economic policy uncertainty as a critical factor for volatility management.
This study explores the main factors influencing international oil price fluctuations, selecting five influential variables: the consumer price index (CPI), industrial production index (IPI), global rig count (ADU), economic policy uncertainty index (EPU), and geopolitical risk index (GRI) based on previous literature. Employing the GARCH-MIDAS model, this research analyzes comparative effects on WTI international oil prices. Our findings highlight the varying degrees of influence, with IPI showing a stronger impact and EPU indicating broader economic implications. The GRI index responds primarily to specific geopolitical events with delayed fluctuations. Our study’s novelty lies in the empirical investigation using the GARCH-MIDAS model, offering valuable insights for policymakers to manage oil price volatility effectively, particularly by addressing economic policy uncertainty as a critical factor.
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Le et al. (2024) studied this question.
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