Abstract:
In this paper, we analyze daily data-based price transmission and volatility spillovers between crude oil and the bond markets of major oil exporters and importers, accounting for structural shifts as a smooth process in causality and volatility spillover estimations. In general, we find that oil prices tend to predict bond prices in the majority of oil exporting countries and two large oil importers (India and China). The feedback from bonds to oil prices is weak and detected only for China and the USA. Oil volatility affects the bond market volatility of some major oil exporters (Kuwait, Norway, and Russia) and one importer (France). However, the most prominent volatility spillovers are from bonds to oil, except for Kuwait and Saudi Arabia. We reveal that taking structural shifts into account strengthens our findings and is particularly important for volatility spillover analysis.
