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Dynamic Impact of the U.S. Monetary Policy on Oil Market Returns and Volatility

Hardik Marfatia, Rangan Gupta () and Esin Cakan ()

No 201916, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we assess the dynamic impact of the U.S. monetary policy announcements on oil market futures returns and volatility. We use intra-day data together with a time-varying modeling approach to study the nature of this dynamic impact. In addition, we also control for macroeconomic news shocks and separately study the response of good and bad realized volatility. Evidence suggests that there is a significant time variation in the response of oil returns as well as its volatility to the Federal Reserve policy announcements. Furthermore, we find that higher (lower) uncertainty about Federal Reserve policy actions weakens (strengthens) the impact of the announcements on oil returns and volatility.

Keywords: Monetary Policy; Macroeconomic Surprises; Oil Returns and Volatility; Time-Varying Model (search for similar items in EconPapers)
JEL-codes: C32 E44 E52 G14 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ene, nep-mac and nep-mon
Date: 2019-02
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