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How Oil Shocks Propagate: Evidence on the Monetary Policy Channel

Author

Listed:
  • Miyamoto, Wataru
  • Nguyen, Thuy Lan
  • Sergeyev, Dmitriy

Abstract

Using high-frequency responses of oil futures prices to prominent oil market news, we estimate the effects of oil supply news shocks when systematic monetary policy is switched off by the zero lower bound (ZLB) and when it is not (normal periods) in Japan, the United Kingdom, and the United States. We find that negative oil supply news shocks are less contractionary (and even expansionary) at the ZLB compared to normal periods. Inflation expectations increase during both periods, while the short nominal interest rates remain constant at the ZLB, pointing to the importance of monetary policy for oil shock propagation.

Suggested Citation

  • Miyamoto, Wataru & Nguyen, Thuy Lan & Sergeyev, Dmitriy, 2024. "How Oil Shocks Propagate: Evidence on the Monetary Policy Channel," CEPR Discussion Papers 18755, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18755
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    More about this item

    Keywords

    Oil price shocks;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics
    • G4 - Financial Economics - - Behavioral Finance

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