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The Impact of Unconventional Monetary Policy Shocks on Energy Prices

In: HANDBOOK OF ENERGY FINANCE Theories, Practices and Simulations

Author

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  • Panagiota Makrychoriti
  • Georgios Moratis
  • Spyros Spyrou

Abstract

We examine the effect of European Central Bank’s (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. Impulse Response Functions suggest that an increase in the ECB’s propensity to unconventional policy decreases energy prices for all five energy price proxies during the first two months after the monetary shock. Since these policies have now become part of a central bank’s arsenal during financial turmoil and may be used in future crises, these results shed light on their potential impact energy prices.

Suggested Citation

  • Panagiota Makrychoriti & Georgios Moratis & Spyros Spyrou, 2020. "The Impact of Unconventional Monetary Policy Shocks on Energy Prices," World Scientific Book Chapters, in: Stéphane Goutte & Duc Khuong Nguyen (ed.), HANDBOOK OF ENERGY FINANCE Theories, Practices and Simulations, chapter 29, pages 743-764, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813278387_0029
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    Cited by:

    1. Soriano, Pilar & Torró, Hipòlit, 2022. "The response of Brent crude oil to the European central bank monetary policy," Finance Research Letters, Elsevier, vol. 46(PA).

    More about this item

    Keywords

    Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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