Uncertainty and oil volatility: New evidence

In this study, we first investigate the impacts of economic policy uncertainty (EPU), monetary policy uncertainty (MPU), and both of them on oil market volatility. We have several noteworthy findings. First, the EPU index can significantly increase the predictive ability compared to benchmark model for the oil market. Second, the high MPU index leads to high fluctuations with respect to oil market, and can remarkably help in forecasting oil volatility. Third, we first find that the MPU and EPU have useful complementary information, and considered both of them together is more powerful to predict oil volatility than separate them. Our conclusions are robust to different forecasting windows, measures and monetary policy uncertainty. (C) 2019 Elsevier B.V. All rights reserved.