YAO AXEL EHOUMAN

Do oil-market shocks drive global liquidity?

Yao Axel Ehouman

Abstract

This paper aims to assess the impact of oil shocks on global liquidity evolution over the 1999–2018 period, an issue not already addressed by literature. To this end, we rely on a two-stage approach that allows us to trace fluctuations in the crude oil price to the underlying supply and demand shocks, on the one hand, and to estimate the responses of global liquidity indicators to these shocks on the other hand. Our results support the existence of a link between oil shocks and global liquidity. In particular, we show that global liquidity responses to oil shocks depend on the shocks’ nature. While aggregate and oil-specific demand shocks have, respectively, negative and positive effects on the evolution of global liquidity, oil supply shocks do not significantly affect global liquidity due to their relatively low contribution to oil price changes. Thus, this paper highlights that oil price movements by driving global liquidity dynamics can be identified as a potential source of financial instability.

Mot(s) clé(s)

Global liquidity; oil price; oil demand shocks; oil supply shocks; Structural VAR.

Dependence structure between oil price volatility and sovereign credit risk of oil exporters: Evidence using a Copula Approach

Yao Axel Ehouman

Abstract

This paper re-examines the dependence structure between uncertainty in oil prices and sovereign credit risk of oil exporters. To address this issue, we employ a copula approach that allows us to capture a myriad of complex and nonlinear dependence structures. Empirical analyses involve daily data of the 5-year sovereign credit default swaps spreads and the crude oil implied volatility from January 2010 to May 2019, covering a sample of ten oil-exporting countries. Except for Brazil and Venezuela, our results provide evidence of significant positive and upper tail dependence in the relationship between oil market uncertainty and oil exporters’ sovereign risk. Overall, our findings highlight that high uncertainty in oil prices coincides with large-scale increases in the sovereign credit risk of oil-exporting countries, supporting the hypothesis that investors, exposed to economic losses from risk events in oil exporters, are all the more pessimistic that prevails high uncertainty about future oil prices. Our findings have implications for oil exporter’ policymakers as well as investors.

Mot(s) clé(s)

Copula; Dependence; Oil market; Sovereign credit risk; Uncertainty

Volatility transmission between oil prices and banks stock prices as a new source of instability: Lessons from the US Experience

Yao Axel Ehouman

Abstract

Linkages between oil prices and stock prices of the US banking sector have become more complex with the strong rise in the US production of shale oil. The concern is whether the exposure of the US banking sector to shale oil companies has led to volatility spillover transmission between
stocks’ prices of the exposed US banks and oil prices. Using stocks prices data of the four major US banks involved in oil and gas industries and the price of West Texas Intermediate crude oil, we investigate these volatility spillovers from 2006 to 2016, using a vector fractional integrated ARMA.
Our results support the existence of such volatility spillovers, suggesting thus a new factor likely to trigger future turmoil on oil markets and in the banking sector.

Mot(s) clé(s)

Oil, US banks stock, Realized Volatility, VARFIMA model .