Oil Price Uncertainty and Real Economic Activities：Importance of Disentangling the Diffusive and Jump Components 44页

Abstract
Most of the econometric works to date rely on realized volatility or option-implied
volatility to study how oil price uncertainty adversely a¤ects the macroeconomy. In
this paper, we argue that the continuous di¤usive oil price volatility predicts real
economic activities better than other common oil volatility measures. We quantify the
continuous and jump components of oil price volatility based on bipower variation.
The estimated di¤usive volatility has signi…cant adverse impacts on future economic
growth, consumption, and real investment. We further reveal important di¤erences in
di¤usive volatility and jumps. The continuous di¤usive volatility is strongly associated
with the economy-wide uncertainty both in-sample and out-of-sample; while jumps are
mainly driven by growth in oil market-speci…c supply and demand.
JEL Classi…cation: G12, G13

Keywords: Crude oil; uncertainty; real economic activity; jump-di¤usion process; high-
frequency.