Economic Policy Uncertainty and International Oil Price Volatility—Based on Continuous Wavelet Transformation and Volatility Spillover Effect Analysis

Abstract

Based on continuous wavelet transform and volatility spillover index of VAR system, this paper quantifies the relationship between economic policy uncertainty and oil price. The result of continuous wavelet transform shows the international oil price is notably related to economic policy uncertainty of world’s major economies in 4-month time scope or longer. Besides, the economic policy uncertainty has dynamic net volatility spillover effect to oil price which shows a upward trend. In the background of intensified global economic friction, the research of economic policy uncertainty and oil price relationship is of great realistic significance to ensure China’s energy security.