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Movements in International Bond Markets: The Role of Oil Prices

Author

Listed:
  • Saban Nazlioglu

    (Department of International Trade and Finance, Faculty of Economics and Administrative Sciences, Pamukkale University, Denizli, Turkey)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

Abstract

In this paper, we analyze daily data-based price transmission and volatility spillovers between crude oil and bond markets of major oil exporters and importers, by accounting for structural shifts as a smooth process in causality and volatility spillover estimations. In general, we find that, oil prices tend to predict bond prices in majority of oil exporting countries, and for the two major oil importers of India and China. But, the feedback from bond to oil prices is weak, and is detected for China and USA. Regarding volatility spillovers, oil volatility affects the bond market volatility of some major oil exporters (Kuwait, Norway and Russia), and an importer (France). However, the most prominent volatility spillovers are from bond to oil, except for Kuwait and Saudi Arabia. We also reveal that taking into account for smooth structural shifts - accounting for structural breaks - strengthens our findings and particularly is important for volatility spillover analysis. Our results have important implications for academics, investors, and policy makers.

Suggested Citation

  • Saban Nazlioglu & Rangan Gupta & Elie Bouri, 2019. "Movements in International Bond Markets: The Role of Oil Prices," Working Papers 201935, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201935
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    More about this item

    Keywords

    Bond and oil markets; price and volatility spillovers; major oil exporters and importers; structural changes;
    All these keywords.

    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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