Nonlinear interest rate effects of global oil price changes: the comparison of net oil-consuming and net oil-producing countries

Abstract

In this article, we test nonlinear causality between global oil price (OP) changes and short-term real interest rate (IR) in large net oil-consuming and net oil-producing countries. Applying nonlinear nonparametric Hiemstra–Jones model and nonlinear parametric Mackey–Glass model, we find no evidence to suggest that potential direct effects of global OP changes on short-term IR are nonlinear in net oil-consuming countries. In contrast, we find such effects to be nonlinear and asymmetric in net oil-producing countries.

Keywords:

• short-term interest rate
• global oil price
• net oil-consuming/oil-producing countries
• nonlinearity
• asymmetry

JEL Classification:

• C14
• E44
• E63
• Q43