The Impacts of Oil Market Sentiment on Macroeconomic Variables: A Panel Vector Autoregression Analysis
Keywords:
oil market, sentiment analysis, OPEC, VAR panel, impulse-responseAbstract
In recent years, OPEC decisions on oil production have caused changes in the price of the commodity and, consequently, have affected the macroeconomic variables of countries. Thus, the objective of the paper is to build an oil market sentiment index from OPEC’s monthly reports and to verify its effects on macroeconomic variables in oil exporting and importing countries. To calculate the polarity, a specific dictionary for economic and financial texts was used. After building the index, a VAR Panel model was estimated. The main results showed that increases in oil market sentiment, that is, more optimism in the commodity market, is capable of raising the economy’s product, reducing the short-term interest rate, and raising the inflation rate. In addition, more optimism in the market leads to lower oil prices. Finally, the results also illustrate that despite the significant effect of the sentiment index on the model variables, this magnitude is lower about oil price shocks.
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