The Impact of Oil Price Shocks on the Term Structure of Interest Rates

Research output: Contribution to journalArticle

Abstract

In a structural VAR framework, we study the impact of oil price shocks in the global crude oil market on the dynamics of the entire yield curve in four industrialised countries with different positions on the oil market; the US, Canada, Norway, and South Korea. Responses of the term structure factors to oil market shocks are shown to differ contingent on the underlying sources that drive oil price shocks and the country’s dependence on oil. Oil market-specific demand shocks result in increases in the level factor in oil-importing countries, but have no such effect in oil-exporting countries. Oil supply disruptions have short-lived negative responses of the slope factors in the US and Canada, associated with loosening monetary policy, whilst demand side shocks tend to lead to increases the slope in all countries. Overall, oil supply and demand shocks jointly account for a considerable amount of the observed variation in the term structure of interest rates.
Original languageEnglish
Pages (from-to)601-620
JournalEnergy Economics
Volume72
Early online date22 Apr 2018
DOIs
Publication statusPublished - 1 May 2018

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Oil price shocks
Oil markets
Oil
Term structure of interest rates
Oils
Factors
Crude oil
Demand shocks
Canada
South Korea
Supply disruption
Structural VAR
Developed countries
Yield curve
Term structure
Importing
Monetary policy
Oil supply
Exporting
Norway

Bibliographical note

© 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International

Keywords

  • Oil prices shocks
  • Term structure of interest rates
  • Yield curve
  • Variance decomposition

Cite this

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The Impact of Oil Price Shocks on the Term Structure of Interest Rates. / Ioannidis, Christos; Ka, Kook.

In: Energy Economics, Vol. 72, 01.05.2018, p. 601-620.

Research output: Contribution to journalArticle

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