A0445
Title: From imports to fracking: A Markov-switching Granger causality analysis of crude oil prices and political polarization
Authors: Charisios Grivas - Aalborg University (Denmark) [presenting]
Rubens Morita - The University of Exeter (United Kingdom)
Abstract: Political polarization has emerged as a major source of macroeconomic uncertainty, yet its connection to commodity markets is not well understood. The evolving relationship between U.S. partisan conflict and crude oil returns is examined through a Markov-switching Granger causality framework with time-varying volatility and correlation, which permits the endogenous identification of structural breaks in the predictive linkages. Based on monthly data from 1981-2025, the model identifies two distinct regimes: Before 2009, oil shocks systematically Granger-caused increases in partisan conflict, reflecting the destabilizing role of import dependence and global supply disruptions; after the global financial crisis and the shale boom, this predictive channel collapsed, and oil prices no longer convey systematic information about domestic polarization. These results challenge the conventional wisdom that oil prices serve as a barometer of U.S political conflict, showing instead that their informational content is contingent on the broader energy and political environment.
