Oil, Equities, and the Zero Lower Bound

Deepa Datta, Benjamin K. Johannsen, Hannah Kwon and Robert Vigfusson

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 2, 214-53

Abstract: From late 2008 to 2014, oil and equity returns were more positively correlated than in other periods. In addition, we show that both oil and equity returns became more responsive to macroeconomic news. We provide empirical evidence that these changes resulted from the zero lower bound (ZLB) on nominal interest rates, consistent with the theoretical predictions of a model that includes the ZLB. Although the ZLB alters the economic environment in theory, supportive empirical evidence has been lacking. Our paper provides clear evidence of the ZLB altering the economic environment.

JEL-codes: E12 E32 E43 G12 G14 Q43 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Oil, Equities, and the Zero Lower Bound (2018)
Working Paper: Oil, equities, and the zero lower bound (2017)
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DOI: 10.1257/mac.20180488

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