US interest rate spread and energy consumption by sector (evidence of pre and post implementation of the Fed's LSAPs policy)

This paper represents the first empirical study to investigate the effects of interest rate spread shocks before and after the implementation of LSAPs (Federal Reserve large-scale asset purchases) on energy consumption for different sectors. The US monthly data (2002–2015) for interest rate spreads, such as term, corporate, and mortgage rate spreads, and paper bills, and the energy used by sector (residential, commercial, industrial, transportation, and electric power) were used in this study. Our analysis provided evidence that a cut in interest rate spreads was seen as a positive signal in the energy market. This paper demonstrated that the mortgage spread (MORS) shock had a significant effect on the energy consumed by the residential sector, after the implementation of unconventional monetary policies. Likewise, paper bill shocks had a significant effect on energy consumption for different sectors before the implementation of unconventional monetary policies. The results indicated that the Federal Fund Effective rate had a weak impact on components of energy consumption before the implementation of quantitative easing policies by the Federal Reserve.