The Impact of Unconventional Monetary Policy Shocks on Energy Prices

Behavioral Finance Laboratory, AUEB, Working Paper Series, BeFin Lab WP 02-17.

25 Pages Posted: 7 Nov 2017

See all articles by Panagiota Makrichoriti

Panagiota Makrichoriti

Athens University of Economics and Business - Department of Accounting and Finance

Georgios Moratis

Athens University of Economics and Business - Department of Accounting and Finance

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: November 6, 2017

Abstract

In this paper we examine the effect of ECB’s unconventional monetary policy measures on energy prices. Our results indicate that the non-standard ECB monetary policies during the recent financial crises had a significant and negative impact on energy prices. For example, we find that these policies accounted for approximately 10% of the price variance for the Light Crude Oil Futures Contract. The second more important contribution has been to the Bloomberg Commodity Index where 8.42% of price volatility is explained. In addition, Impulse Response Functions suggest that an increase in the ECB’s propensity to unconventional monetary policy decreases energy prices for all five energy price proxies during the first two months after the monetary shock. Since unconventional monetary policies have now become part of a central bank’s arsenal during financial turmoil and crisis, and thus may be used in future crises, these results shed light on the potential impact of these policies on important economic variables, such as energy prices.

Keywords: Unconventional Monetary Policy, Energy Prices, Qual-VAR, Panel-VAR

JEL Classification: E52, E44, Q43

Suggested Citation

Makrichoriti, Panagiota and Moratis, Georgios and Spyrou, Spyros I., The Impact of Unconventional Monetary Policy Shocks on Energy Prices (November 6, 2017). Behavioral Finance Laboratory, AUEB, Working Paper Series, BeFin Lab WP 02-17. . Available at SSRN: https://ssrn.com/abstract=3065910 or http://dx.doi.org/10.2139/ssrn.3065910

Panagiota Makrichoriti

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Georgios Moratis

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Spyros I. Spyrou (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

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