Do oil and gas prices influence economic policy uncertainty differently: Multi-country evidence using time-frequency approach

This paper using data from major oil dependent countries examines the linear and nonlinear causal relationship, and time-frequency co-movement between economic policy uncertainty (EPU) and energy prices (oil and gas future prices). The empirical analysis considered wavelet coherence and wavelet phase angle tests. Moreover, our results more insights to answers whether the co-movement and causality between EPU and energy prices are different for oil and gas. EPU and oil future price returns move together but in the opposite direction. Oil futures price returns provide no additional information in explaining the policy uncertainty in comparison to the spot price returns. We also note that findings with nominal oil prices are similar to results with real prices. In times of economic turmoil or crises, the relationship between policy uncertainty and energy prices becomes stronger-and hence demands particular attention from policymakers, energy companies, and investors. (C) 2021 Board of Trustees of the University of Illinois. Published by Elsevier Inc. All rights reserved.