The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US

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Kocaarslan B., SOYTAŞ M. A., SOYTAŞ U.

ENERGY ECONOMICS, vol.86, 2020 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 86
  • Publication Date: 2020
  • Doi Number: 10.1016/j.eneco.2019.104625
  • Journal Name: ENERGY ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, PASCAL, ABI/INFORM, Agricultural & Environmental Science Database, Business Source Elite, Business Source Premier, Compendex, EconLit, Environment Index, Geobase, INSPEC, PAIS International, Public Affairs Index, Sociological abstracts
  • Keywords: Asymmetric effects, Unemployment, Nonlinear ARDL (NARDL), Oil prices, Oil price uncertainty, Interest rates, ECONOMIC-ACTIVITY, CRUDE-OIL, INVESTMENT EVIDENCE, IMPLIED VOLATILITY, INPUT PRICES, SHOCKS, MACROECONOMY, TIME, TESTS, IRREVERSIBILITY
  • Middle East Technical University Affiliated: Yes


In this study, we investigate the presence of asymmetric interactions between oil prices, oil price uncertainty, interest rates, and unemployment in a cointegration framework. Utilizing the nonlinear auto-regressive distributed lag (NARDL) approach, we show the asymmetric responses of unemployment to changes in oil prices, oil price uncertainty and interest rates in the long-run. More specifically, the results of our analyses suggest that an increase in oil price results in increased unemployment while there is no significant impact of reduced oil prices. On the one hand, reduced oil price uncertainty leads to a decrease in unemployment whereas an increase in oil price uncertainty does not have an impact. We also observe increased unemployment in response to a decrease in interest rates as the impact of increased interest rates is not significant. Last but not least, we find that option-implied oil price volatility, as a measure of oil price uncertainty, outperforms the conditional volatility of crude oil prices in predicting unemployment. This study provides valuable implications for policymakers to design sound economic policies. (C) 2019 Elsevier B.V. All rights reserved.