Research Of the Non-Linear Dynamic Relationship between Global Economic Policy Uncertainty and Crude Oil Prices

This paper examines the relationship between economic policy uncertainty and crude oil prices from a global perspective within a non-linear analytical framework. Firstly, the non-linear dynamic trends between GEPU and WTI crude oil prices are examined using the VAR-filtered BDS test, followed by the test of the non-linear Granger causality, which shows significant non-linear causal relationship between GEPU and WTI oil prices. Furtherly, this paper use threshold vector autoregressive model (TVAR) and threshold vector error correction model (TVECM) to analysis the long-term and short-term non-linear dynamic adjustment processes between GEPU and WTI oil prices, the result shows that there is an optimal threshold between GEPU and WTI. In the low global economic policy uncertainty regime, the relationship between GEPU and WTI is mutually beneficial, while in the high global economic policy uncertainty regime, the relationship between GEPU and WTI is mutually inhibited. Meanwhile, the TVECM results show that in the first regime, GEPU adjusts towards equilibrium at a faster rate, while in the second regime, WTI adjusts towards equilibrium at a faster rate