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Time-Varying Causality between Bond and Oil Markets of the United States: Evidence from Over One and Half Centuries of Data

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  • Semei Coronado

    (Departamento de Metodos Cuantitativos, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Periférico Norte 799, Modulo M 201, Nucleo, Universitario los Belenes, Zapopan, Jalisco, 45100, Mexico)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Saban Nazlioglu

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

  • Omar Rojas

    (Universidad Panamericana. Escuela de Ciencias Economicas y Empresariales. Alvaro del Portillo 49, Zapopan, Jalisco, 45010, Mexico)

Abstract

This paper analyzes time-varying causality between government bond and oil returns of the United States (US) over the monthly period of 1859:10 to 2019:03, i.e., the longest possible span of historical data, starting from the beginning of the modern era of the petroleum industry. While the standard constant parameter causality test fails to pick up any evidence of causality, the time-varying framework shows evidence of bi-directional spillovers over the entire sample period. The results are robust to inclusion of stock returns as a control variable in the model. We also detect evidence of time-varying causality-in-volatility between sovereign bond and oil markets, as well as spillovers in returns and volatility from the oil market to corporate bonds.

Suggested Citation

  • Semei Coronado & Rangan Gupta & Saban Nazlioglu & Omar Rojas, 2020. "Time-Varying Causality between Bond and Oil Markets of the United States: Evidence from Over One and Half Centuries of Data," Working Papers 202006, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202006
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    More about this item

    Keywords

    Bond and Oil Markets; Returns and Volatility Spillovers; Time-Varying Causality;
    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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