Title

Dynamic impact of the U.S. monetary policy on oil market returns and volatility

Document Type

Article

Publication Date

5-1-2021

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 for West Texas Intermediate (WTI) oil futures 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. Broadly, we also find that higher (lower) uncertainty about Federal Reserve policy actions is associated with a weaker (stronger) impact of the surprise policy announcements on oil returns and volatility.

DOI

10.1016/j.qref.2021.02.002

Publication Title

Quarterly Review of Economics and Finance

Volume Number

80

First Page

159

Last Page

169

ISSN

10629769

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