Information effects of monetary policy announcements on oil price

Yang Yang, Jiqiang Zhang and Sanpan Chen

Journal of Commodity Markets, 2023, vol. 30, issue C

Abstract: If the information held by the central bank is different from that of market participants, then the central bank’s announcement not only affects the view of monetary policy but also the view of economic fundamentals. This study investigates the information effects of monetary policy announcements on oil prices using a structural vector autoregression (VAR) model identified by sign restrictions. The sign restrictions rely on the high-frequency linkage between stock prices and interest rates surrounding the policy announcements. We find that a positive central bank information shock, which raises the interest rate by six basis points, leads to a 1.7% increase in oil prices within two months. We also find that central bank information shocks affect oil prices through the finance and expectation channels.

Keywords: Information effect; Monetary policy announcement; Oil price; Sign restriction (search for similar items in EconPapers)
JEL-codes: E52 E58 Q40 Q43 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:30:y:2023:i:c:s2405851322000265

DOI: 10.1016/j.jcomm.2022.100268

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