Scandinavian Working Papers in Economics
Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science
No 2017/7: The Zero Lower Bound and Market Spillovers: Evidence from the G7 and Norway
Evangelos Kyritsis () and Apostolos Serletis ()
Additional contact information
Evangelos Kyritsis: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Apostolos Serletis: Dept. of Economics, University of Calgary, Postal: University of Calgary, Department of Economics, Calgary, Alberta, T2N 1N4, Canada
Abstract: This paper investigates mean and volatility spillovers between the crude oil market and three financial markets, namely the debt, stock, and foreign exchange markets, while providing international evidence from each of the seven major advanced economies (G7), and the small open oil-exporting economy of Norway. Using monthly data for the period from May 1987 to March 2016, and a four-variable VARMA-GARCH model with a BEKK variance specification, we find significant spillovers and interactions among the markets, but also absence of a hierarchy of influence from one specific market to the others. We further incorporate a structural break to examine the possible effects of the prolonged episode of zero lower bound in the aftermath of the global financial crisis, and provide evidence of strengthened linkages from all the eight international economies.
Keywords: Crude oil; Financial markets; Mean and volatility spillovers; Structural breaks; VARMA-BEKK model
50 pages, May 31, 2017
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