199 / 2024-04-23 09:39:43

Oil Price Shocks through Global Production Network: Evidence from the Stock Market

 Oil price shocks,Production network,Network effect,Stock return,Spatial autoregression

We explore the role of the global production network in transmitting oil price shocks to stock markets. Integrating global input-output data with stock return information and applying a spatial autoregressive model, our findings show that oil price shocks significantly reduce global industrial stock returns, with approximately two-thirds of this downturn attributable to the network effects of global production linkages. These shocks affect markets via their impact on consumption and production industries and by reducing financial institutions' liquidity. Our evidence suggests the important role of production networks in transmitting information across diverse markets.