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Time‐varying causality between bond and oil markets of the United States: Evidence from over one and half centuries of data

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  • Semei Coronado
  • Rangan Gupta
  • Saban Nazlioglu
  • Omar Rojas

Abstract

This paper analyzes the time‐varying causality between government bond and oil returns of the United States over the monthly period of 1859:10 to 2019:03, that is, the longest possible span of historical data, starting from the beginning of the modern era of the petroleum industry. While the standard constant parameter causality test fails to pick up any evidence of causality, the time‐varying framework shows evidence of bi‐directional spillovers over the entire sample period. The results are robust to the inclusion of stock returns as a control variable in the model. We also detect evidence of time‐varying causality‐in‐volatility between sovereign bond and oil markets, as well as spillovers in returns and volatility from the oil market to corporate bonds.

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  • Semei Coronado & Rangan Gupta & Saban Nazlioglu & Omar Rojas, 2023. "Time‐varying causality between bond and oil markets of the United States: Evidence from over one and half centuries of data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2239-2247, July.
    • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:2239-2247
    DOI: 10.1002/ijfe.2534
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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