Exploring Feedback Loop Effects in Oil-Macro-Financial Linkages: A Structural Vector Autoregression and Review

The feedback loop effects of shocks of oil prices on economic growth and bank performance, transmitted through oil-macro-financial linkages, remain underexplored, particularly during declining oil prices. This study addresses this gap by employing multiple analytical models to assess feedback loop effects, identify their key determinants, and develop robust validation processes. Multivariate regression confirms the significant effect of oil price shock on bank asset quality and economic activity, reinforcing feedback loop effects. An interdisciplinary Granger Causality Diagram and degree centrality analysis enhance the identification of influential variables, offering a novel methodological contribution. Furthermore, an extended Structural Vector Autoregressive (SVAR) model, integrating external factors, strengthens the robustness of the findings. This comprehensive approach provides crucial insights into oil price transmission mechanisms and feedback effects, enabling Malaysian policymakers to develop targeted strategies that support household financial stability, manage consumer price fluctuations, and strengthen family economic resilience.

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