Oil, Equities, and the Zero Lower Bound
Deepa Dhume Datta,
Benjamin K. Johannsen,
Hannah Kwon and
Robert Vigfusson ()
No 2018-058, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US)
From late 2008 to 2017, 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 and theoretical justification that these changes resulted from nominal interest rates being constrained by the zero lower bound (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, with implications for the effectiveness of fiscal and monetary policy.
Keywords: Equities; Macroeconomic surprises; New-keynesian model; Oil; Zero lower bound (search for similar items in EconPapers)
JEL-codes: F31 F41 E30 E01 C81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: Oil, equities, and the zero lower bound (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-58
Ordering information: This working paper can be ordered from
http://www.federalre ... /feds/fedsorder.html
Access Statistics for this paper
More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (US) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ().