Causal Nexus Between COVID-19 Risk and Global Oil Price Shocks: Evidence From a Time and Frequency Causality Approach

Abstract

This paper examines the causal relationship between global oil price returns and aggregate COVID-19 index and COVID-19 uncertainty index by using daily data from 31st December 2020 to 28th April 2021. The results from the causality test show unidirectional causality from aggregate COVID-19 index to oil price returns and from uncertainty index to oil price returns. Furthermore, the frequency domain causality reveals the same results for both short and long periods. From a policy perspective, investors and industry people should pay attention to the uncertainty caused by COVID-19.