Does geopolitical risk strengthen or depress oil prices and financial liquidity? Evidence from Saudi Arabia

By Chiwei Su, Khalid Khan, Ran Tao, Moldovan Nicoleta-Claudia. Energy, 2019

250 citations recorded by the source corpus.

Abstract The present study assesses the causality of geopolitical risk (GPR), oil prices (OPs) and financial liquidity by means of wavelet analysis, which aims to investigate whether such relationships support the monetary equilibrium model in Saudi Arabia. Our findings indicate that OP and financial liquidity are related in the time domain when GPR is high. We detect both short- and medium-term correlations among OPs, financial liquidity and GPR in the frequency domain. Additionally, in the absence of GPR, we notice a mid-term correlation between OPs and financial liquidity in the time and frequency domains. Our results support the assumed monetary equilibrium model, which, in turn, is an indication of the fact that OPs are dependent on GPR and that financial liquidity relies on the OP. Such conclusions suggest that the country would benefit from adopting a resource income diversification policy to reduce its impact on OP fluctuations. Additionally, the diversion of unnecessary government expenditures to the investment programs would also represent a beneficial shift in action.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/14974ea9a59df1caad3207f897e60b30f0e35347

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Citations in the corpus

Do Economic Policy Uncertainty and Geopolitical Risk Lead to Environmental Degradation? Evidence from Emerging Economies (2021, background): “For instance, a several studies highlight that GPR effects economic growth and tourism [14], energy consumption [15], financial markets [16], and research and development [17,18].”
To what extent does COVID-19 drive stock market volatility? A comparison between the U.S. and China (2021, methodology): “Wavelet analysis has been widely used in the field of economics and finance (Su et al., 2019; 2020).”