Asymetric Shocks and Long-Memory Volatility: An Egarch Approach to Global Oil and Local Import Dynamics
This study investigates the volatility dynamics of commodity import prices in Republic of Moldova and global Brent crude oil prices, employing advanced econometric models to enhance understanding of risk in small open economies and energy markets. Utilizing monthly data from 1992 to 2025 for Republic of Moldova's Commodity Import Price Index and from January 1990 to March 2025 for Brent oil, the analysis confirms that both series are integrated of order one, with no significant structural breaks in the mean, supporting constant-parameter modelling. For Republic of Moldova's Commodity Import Price Index, an AR (1)-GARCH (1,1) specification effectively captures high volatility persistence and symmetric shock responses, indicating long-memory effects without asymmetry. In contrast, Brent oil exhibits leverage effects, where negative shocks amplify volatility more than positive ones, best demonstrated via AR(1)-EGARCH(1,1). Comprehensive diagnostics, including ADF tests, Bai-Perron structural break analysis, ARCH-LM, Ljung-Box, and Nyblom stability tests, validate model adequacy, confirming residual whiteness and structural stability. These findings underscore the need for symmetric risk management in Republic of Moldova's import sector and asymmetric hedging in oil markets, with implications for macroeconomic stability and policy formulation. Research gaps highlight opportunities for multivariate spillover analysis and regime-switching models to address cross-market dependencies.