IDEAS home Printed from https://ideas.repec.org/a/taf/jitecd/v24y2015i1p24-42.html
   My bibliography  Save this article

The impact of monetary policy on oil price persistence: An application of the smooth regime-switching model

Author

Listed:
  • Po-Chin Wu
  • Shiao-Yen Liu
  • Sheng-Chieh Pan

Abstract

This paper employs the smooth transition autoregressive model to evaluate the persistence of oil price changes, and chooses monetary policy variables as transition variables of the model to assess their roles in the persistence effects. The empirical results show that oil price changes displayed asymmetric adjustments within different regimes and were more sensitive to the movement of interest rates than inflation rate. In addition, high inflation rate would give rise to low oil price persistence, and expansionary monetary policy would bring about higher oil price persistence. Moreover, when the short- and long-term interest rates were over their threshold values, the persistence effects of oil price changes were opposite. In the present relatively low US interest rates, adopting either an inflation-targeting policy or/and a debt-financing policy to stimulate economic growth, the timing is appropriate and the effect will be positive and expected because of low persistence of oil price changes.

Suggested Citation

  • Po-Chin Wu & Shiao-Yen Liu & Sheng-Chieh Pan, 2015. "The impact of monetary policy on oil price persistence: An application of the smooth regime-switching model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 24(1), pages 24-42, February.
  • Handle: RePEc:taf:jitecd:v:24:y:2015:i:1:p:24-42
    DOI: 10.1080/09638199.2013.848462
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09638199.2013.848462
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jitecd:v:24:y:2015:i:1:p:24-42. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RJTE20 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.