Time-frequency co-movements between oil prices and interest rates: Evidence from a wavelet-based approach

Walid Mensi*, Mobeen Ur Rehman, Khamis Hamed Al-Yahyaee

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)


This paper investigates time–frequency co-movements between crude oil prices and interest rates. To test this relationship, the study applied a continuous wavelet and cross wavelet approaches to data from West Texas Intermediate (WTI) crude oil prices and interest rates in the United States (U.S.). Results from the sample period revealed significant relationships, in the intermediate term, between WTI crude oil prices and U.S. interest rates. Moreover, co-movements between oil price and interest rate variables were especially sensitive during abnormal political events and periods of financial ‘meltdown’. We further use Partial Wavelet Coherence (PWC) and Multiple Wavelet Coherence (MWC) methods to investigate the impacts of five major control variables namely GDP growth, unemployment, three-month Treasury bill, CPI index and industrial production index. The results show a powerful impact of control variables on oil-interest rates co-movements under different frequencies. Finally, we show evidence of co-integrating long run relationship between oil markets and control variables. These results have important implications for energy investors and policy makers.

Original languageEnglish
Article number100836
JournalNorth American Journal of Economics and Finance
Publication statusPublished - Jan 2020


  • Co-movements
  • Interest rates
  • Multivariate wavelet approach
  • Oil prices

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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