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Coronavirus and Oil Price Crash
LAGOS (Capital Markets in Africa) – Coronavirus (COVID-19) creates fear and uncertainty, hitting the global economy and amplifying the volatility of the financial markets. The oil price reaction to COVID-19 was gradually accommodated until March 09, 2020, when, 49 days after the release of the first coronavirus monitoring report by the World Health Organization (WHO), Saudi Arabia floods the market with oil. As a result, international prices drop with more than 20% in one single day. Against this background, the purpose of this paper is to investigate the impact of COVID-19 numbers on crude oil prices, while controlling for the impact of financial volatility and the United States (US) economic policy uncertainty. Our ARDL estimation shows that the COVID-19 daily reported cases of new infections have a marginally negative impact on the crude oil prices in the long run. Nevertheless, by amplifying the volatility of the financial markets, COVID-19 also has an indirect effect on the recent dynamics of crude oil prices.
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