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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, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18755
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    Citations

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    Cited by:

    1. Hilde C. Bjornland & Jamie L. Cross & Jonas Holz, 2025. "Re-visiting the Relationship Between Oil Prices and Monetary Policy," CAMA Working Papers 2025-19, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Zhu, Zixiang & Wen, Yake & Zhou, Weimin & Liu, Xintong, 2025. "The state-dependent effects of oil supply news shocks," Energy Economics, Elsevier, vol. 149(C).
    3. Xiwen Bai & Jesus Fernandez-Villaverde & Yiliang Li & Francesco Zanetti, 2026. "State Dependence of Monetary Policy During Global Supply Chain Disruptions," CAMA Working Papers 2026-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

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    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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