EconPapers    
Economics at your fingertips  
 

The high-frequency response of energy prices to U.S. monetary policy: Understanding the empirical evidence

Carlo Rosa

Energy Economics, 2014, vol. 45, issue C, 295-303

Abstract: This paper examines the impact of conventional and unconventional monetary policy on energy prices using an event study with intraday data. Three measures for monetary policy surprises are used: 1) the surprise change to the current federal funds target rate, 2) the surprise component to the future path of policy, and 3) the unanticipated announcement of future large-scale asset purchases (LSAP). Estimation results show that monetary policy surprises have economically important and highly significant effects on the level and volatility of energy futures prices and their trading volumes. I find that, on average, a hypothetical unanticipated 100-basis-point hike in the federal funds target rate is associated with roughly a 3% decrease in West Texas Intermediate crude oil prices. I also document that, in a narrow window around the FOMC meeting, the Federal Reserve's LSAP1 and LSAP2 programs have a cumulative financial market impact on crude oil equivalent to an unanticipated cut in the federal funds target rate of 156 basis points.

Keywords: Monetary policy; Energy prices; Federal funds and oil futures (search for similar items in EconPapers)
JEL-codes: C1 E5 F3 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988314001443
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:295-303

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-09-08
Handle: RePEc:eee:eneeco:v:45:y:2014:i:c:p:295-303