Monetary policy and the oil futures market

Bundesbank WP: We assess the transmission of monetary policy shocks on oil prices using a VAR model. We identify monetary policy and fi nancial activity shocks disentangled from demand and oil supply shocks using sign restrictions. We obtain the following main fi ndings. (i) Monetary policy and financial activity shocks both have a signi ficant e ffect on the oil price. (ii) Monetary policy has made large positive contributions to oil price growth in 2008. (iii) Monetary policy aff ects the oil price primarily through fundamental (supply and demand) channels rather than through financial activity.