Oil Price and Geopolitics Risk: New Causality Insights in Frequency-Domain 1

The paper explores the causality between oil price and geopolitical risk at global level by using the short- and long-run test c/ causality in the frequency-domain, over the period May, 1987 -April, 2020. For robustness checks, alternative tools in time-domain and additional variables are also considered. The key result claims that the oil price is a crucial signal for geopolitical risk on short-(i.e. up to 3 months) and long-run (i.e. more than 9 months) through its threats component. Interesting, no evidence shows that the oil price can explain the geopolitical acts per se. The results remain robust under the u jluence cf global real economic activity in industrial commodity market. Surprisingly, no causality running from geopolitical risk to oil price is found.