Energy price dynamics in the face of uncertainty shocks and the role of exchange rate regimes: A global cross-country analysis

Abstract

This paper investigates the impact of geopolitical risk (GPR) and global uncertainty (WUI) on energy prices across 185 economies from 1980 to 2023, while accounting for the role of exchange rate regimes. Using a panel fixed-effects model and a panel SVAR framework, we examine whether uncertainty shocks translate into energy price inflation and how exchange rate regimes influence these dynamics. The results indicate that geopolitical risk and global uncertainty have significant effects on energy prices, with stronger price reactions under flexible exchange rate regimes. We further decompose the effects by country classification, revealing that oil-exporting economies and emerging markets exhibit distinct responses. Our findings highlight the importance of exchange rate policies in mitigating uncertainty-driven energy price volatility. The paper contributes to the literature by providing a global empirical perspective on uncertainty-energy price interactions, with relevant implications for policymakers managing exchange rate regimes and energy market stability.