Time-Varying Impact of Geopolitical Risks on Oil Prices

Juncal Cunado, Rangan Gupta, Chi Keung Lau, Xin Sheng

Research output: Contribution to journalArticlepeer-review

123 Citations (Scopus)


This paper analyses the dynamic impact of geopolitical risks (GPRs) on real oil returns for the period February 1974 to August 2017, using a time-varying parameter structural vector autoregressive (TVP-SVAR) model. Besides the two variables of concern, the model also includes growth in world oil production, global economic activity (to capture oil-demand), and world stock returns. We show that GPRs (based on a tally of newspaper articles covering geopolitical tensions), in general, has a significant negative impact on oil returns, primarily due to the decline in oil demand captured by the global economic activity. Our results, thus, highlight the risk of associating all GPRs with oil supply shocks driven by geopolitical tensions in the Middle East, and hence, ending up suggesting that higher GPRs drive up oil prices.
Original languageEnglish
Pages (from-to)692-706
Number of pages15
JournalDefence and Peace Economics
Issue number6
Early online date28 Jan 2019
Publication statusPublished - 17 Aug 2020


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