Economics

Quantifying nonlinear effects of BRIC and G4 liquidity on oil prices

Z. Zhou and X. Zhang

Discover how financial liquidity in the BRIC and G4 economies influences oil prices, particularly during crises. This insightful research by Zhiping Zhou and Xuan Zhang uncovers that shocks to BRIC liquidity lead to significant increases in oil prices, even outpacing the effects of G4 liquidity during turbulent times.

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Playback language: English

Index

Abstract

This article investigates the impact of financial factors, specifically the liquidity of BRIC (Brazil, Russia, India, and China) and G4 (Eurozone, Japan, UK, and US) economies, on oil prices. Using single-state and Markov-switching VAR models on monthly data from 1999-2020, the study finds that positive shocks to BRIC liquidity significantly increase real oil prices. Unexpected G4 liquidity increases are also positively linked to real oil prices, particularly during crisis periods (like the subprime crisis and COVID-19 pandemic). The impact of BRIC liquidity on oil prices is greater than that of G4 liquidity, especially during crises.

Publisher

Humanities and Social Sciences Communications

Published On

Apr 13, 2022

Authors

Zhiping Zhou, Xuan Zhang

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