Unravelling Feedback Loop Effects in Oil-Macro-Financial Linkages: An Interdisciplinary Approach Using Econometrics, Network Analysis and SVAR

This study examines feedback loop effects within oil-macro-financial linkages, focusing on how oil price shocks—particularly declines affect macroeconomic stability and financial sector performance. A comprehensive methodological framework integrates Structural Vector Autoregression (SVAR) with Impulse Response Functions and Variance Decomposition to trace the transmission of oil shocks to economic and banking variables, particularly non-performing loans. Granger causality analysis is used to establish lead-lag relationships, while degree centrality from network theory identifies the most influential variables within the system. The findings confirm the existence of significant feedback loops, with declining oil prices having a more profound and destabilizing impact than rising prices. Structural break analysis further reveals critical periods of instability, highlighting bidirectional causality between macroeconomic and financial indicators. The combination of network analysis and econometric modeling improves the identification of systemic risk channels and amplifiers. Policy implications emphasize the need for sector-specific analysis and dynamic scenario planning. Policymakers should strengthen macroprudential frameworks through adaptive capital buffers, targeted lending regulations, robust risk monitoring, and coordinated institutional responses. Transparent communication strategies are also vital for stabilizing market expectations during periods of oil price volatility. This study’s originality lies in its interdisciplinary integration of econometrics, finance, and network theory. By combining SVAR, Granger causality, and degree centrality, it delivers a novel analytical approach that enhances understanding of complex feedback mechanisms, uncovers hidden systemic risks, and quantifies the disproportionate effects of oil price downturns. This contribution advances theoretical insight and supports evidence-based policymaking in the context of oil-induced macro-financial vulnerabilities.