Monetary Policy and the Oil Futures Market

32 Pages Posted: 20 Jun 2013

See all articles by Sandra Eickmeier

Sandra Eickmeier

Deutsche Bundesbank

Marco J. Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2012

Abstract

We assess the transmission of monetary policy shocks on oil prices using a VAR model. We identify monetary policy and financial activity shocks disentangled from demand and oil supply shocks using sign restrictions. We obtain the following main findings. (i) Monetary policy and financial activity shocks both have a significant effect on the oil price. (ii) Monetary policy has made large positive contributions to oil price growth in 2008. (iii) Monetary policy affects the oil price primarily through fundamental (supply and demand) channels rather than through financial activity.

Keywords: oil prices, monetary policy, financial activity, VAR model, sign restrictions

JEL Classification: E52, C32, Q41, Q31

Suggested Citation

Eickmeier, Sandra and Lombardi, Marco Jacopo, Monetary Policy and the Oil Futures Market (November 1, 2012). Available at SSRN: https://ssrn.com/abstract=2281773 or http://dx.doi.org/10.2139/ssrn.2281773

Sandra Eickmeier

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Marco Jacopo Lombardi (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41612809492 (Phone)

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