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Monetary policy and the transmission of oil shocks

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  • Bachmeier, Lance
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    Abstract

    This paper provides evidence on the role played by monetary policy in the transmission of oil shocks to the US economy. We show that for the period since 1986, oil shocks have had a negative effect on stock returns, regardless of whether the oil shock is defined as the percentage change in the price of oil or a nonlinear transformation of that series. We then demonstrate that there is no relationship between the reaction of individual stock prices to oil shocks and to monetary policy shocks. This implies that oil shocks do have effects on the economy beyond their effect on monetary policy. We conclude that systematic monetary policy is not as effective as suggested in some previous studies.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 30 (2008)
    Issue (Month): 4 (December)
    Pages: 1738-1755

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    Handle: RePEc:eee:jmacro:v:30:y:2008:i:4:p:1738-1755

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    Web page: http://www.elsevier.com/locate/inca/622617

    Related research

    Keywords: Systematic monetary policy Oil shocks Stocks Nonlinearity;

    References

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    Citations

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    Cited by:
    1. Zhu, Hui-Ming & Li, Su-Fang & Yu, Keming, 2011. "Crude oil shocks and stock markets: A panel threshold cointegration approach," Energy Economics, Elsevier, vol. 33(5), pages 987-994, September.
    2. Farzanegan, Mohammad Reza, 2012. "Does the Iranian oil supply matter for the oil prices?," MPRA Paper 36030, University Library of Munich, Germany.
    3. Chen, Shiu-Sheng, 2010. "Do higher oil prices push the stock market into bear territory?," Energy Economics, Elsevier, vol. 32(2), pages 490-495, March.
    4. Jaime Casassus & Freddy Higuera, 2011. "Stock Return Predictability and Oil Prices," Documentos de Trabajo 406, Instituto de Economia. Pontificia Universidad Católica de Chile..
    5. Lizardo, Radhamés A. & Mollick, André V., 2010. "Oil price fluctuations and U.S. dollar exchange rates," Energy Economics, Elsevier, vol. 32(2), pages 399-408, March.
    6. Mollick, André Varella & Assefa, Tibebe Abebe, 2013. "U.S. stock returns and oil prices: The tale from daily data and the 2008–2009 financial crisis," Energy Economics, Elsevier, vol. 36(C), pages 1-18.
    7. Iwayemi, Akin & Fowowe, Babajide, 2011. "Impact of oil price shocks on selected macroeconomic variables in Nigeria," Energy Policy, Elsevier, vol. 39(2), pages 603-612, February.
    8. Moez Khalfallah & Bruno-Laurent Moschetto & Frédéric Teulon, 2014. "Evaluation of the profitability of companies financed by venture capital (CVC) listed on the French market," Working Papers 2014-085, Department of Research, Ipag Business School.
    9. George Filis & Ioannis Chatziantoniou, 2014. "Financial and monetary policy responses to oil price shocks: evidence from oil-importing and oil-exporting countries," Review of Quantitative Finance and Accounting, Springer, vol. 42(4), pages 709-729, May.
    10. David C Broadstock & Rui Wang & Dayong Zhang, 2014. "The direct and indirect e ects of oil shocks on energy related stocks," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 146, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    11. Rania Jammazi & Duc Khuong Nguyen, 2014. "Responses of international stock markets to oil price surges: a regimeswitching perspective," Working Papers 2014-080, Department of Research, Ipag Business School.

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