The Impact of Oil Price Shocks on U.S. Bond Market Returns

Wensheng Kang, Ronald Ratti and Kyung Hwan Yoon ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper examines the effect of the demand and supply shocks driving the global crude oil market on aggregate U.S. bond index real returns. A positive oil market-specific demand shock is associated with significant decreases in aggregate bond index real returns for 8 months following the shock. A positive innovation in aggregate demand has a negative effect on real bond return that is statistically significant and becomes more adverse over 24 months. Structural shocks driving the global oil market jointly account for 27.1% of the variation in real bond returns at 24 month horizon. A spillover index from rolling SVAR models is used to identify the interdependence between the oil market and bond returns. The mean for this spillover index is 0.381 over 2001:01-2011:12 and 0.476 over September through December 2008 during the height of the global financial crisis.

Keywords: Demand shocks; Oil prices; Bond returns; Supply shocks (search for similar items in EconPapers)
JEL-codes: E44 G12 Q43 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014-04
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (87)

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Related works:
Journal Article: The impact of oil price shocks on U.S. bond market returns (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2014-33

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