Dmitriy Sergeyev, Professor, Bocconi University
Abstract: Using high-frequency responses of oil futures prices to prominent oil market news, we provide new evidence on the effects of oil supply news shocks when the nominal interest rate is near the zero lower bound (ZLB) in Canada, the Euro Area, Japan, the United Kingdom, and the United States. In all five countries, negative oil supply news shocks are less contractionary (and sometimes even expansionary) in the ZLB periods than outside of them. Inflation expectations increase at the ZLB and outside of it, while the short nominal interest rates do not respond to oil shocks at the ZLB.