Edinburgh Napier University

  This paper investigates the relationships between the global oil market, stock markets, and economic policy, focusing on China and the US. We use a time-varying parameter stochastic volatility vector autoregression model to examine the transmission mechanisms between fluctuation in the global oil price, the volatility of the Chinese and US stock markets, and economic policy uncertainty in China and the US from 2003 to 2020. We observe significant correlations between the volatility of the two countries’ stock markets and fluctuation in the global oil price. Compared with the Chinese stock market, the US stock market has a greater impact on the global oil market. We also find that an increase in economic policy uncertainty in the two countries exacerbates fluctuation in the global oil price, particularly during times of crisis. In turn, greater fluctuation in the global oil price increases stock market volatility and economic policy uncertainty in both countries.