The Impact of Unconventional Monetary Policy Shocks on Energy Prices

Panagiota Makrychoriti, Georgios Moratis and Spyros Spyrou

Chapter 29 in Handbook of Energy Finance:Theories, Practices and Simulations, 2020, pp 743-764 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We examine the effect of European Central Bank’s (ECB’s) unconventional monetary policy measures on energy prices. Our results indicate that the non-standard ECB monetary policies during the recent financial crises had a significant and negative impact on energy prices. For example, we find that these policies accounted for approximately 10% of the price variance for the Light Crude Oil Futures Contract. Impulse Response Functions suggest that an increase in the ECB’s propensity to unconventional policy decreases energy prices for all five energy price proxies during the first two months after the monetary shock. Since these policies have now become part of a central bank’s arsenal during financial turmoil and may be used in future crises, these results shed light on their potential impact energy prices.

Keywords: Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets (search for similar items in EconPapers)
JEL-codes: G20 G32 Q40 (search for similar items in EconPapers)
Date: 2020
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