Predicting oil price bubbles: monetary policy versus central bank information shocks

Polat O., Gupta R., Brahim M., Bouri E.

NORTH AMERICAN JOURNAL OF ECONOMICS & FINANCE, cilt.86, ss.1-13, 2026 (SSCI, Scopus)

Özet

This paper compares the predictive roles of monetary policy and central bank information shocks in the formation of bubbles in West Texas Intermediate (WTI) oil prices. Using daily data from February 1990 to July 2025, positive and negative bubbles in the short-, medium-, and long-term horizons are first detected. Then, a nonparametric causality-in-quantiles framework is employed to assess predictability at different levels of oil bubbles. The results show that both shocks predict the entire conditional distributions of all bubble indicators. Central bank information shocks carry relatively stronger predictive power than monetary policy surprises. In addition, the causal effect of these two shocks is higher for negative bubbles than positive ones, especially in the short-term. These findings suggest that central bank information shocks matter more than central bank information shocks to oil-market investors and traders when trying to predict impending crashes and recoveries in the oil market.