Int. J. Economic Policy in Emerging Economies, Vol. 11, Nos. 1/2, 2018 159 Copyright © 2018 Inderscience Enterprises Ltd. The response of oil market to US monetary policy surprises Tarek Chebbi Faculty of Economic Sciences and Management of Sousse, University of Sousse, Cité Riadh, Sousse 4023, Tunisia Email: chebbitarekfsegs@hotmail.fr Abstract: The impact of monetary policy surprises from the USA on volatility of oil returns are examined over a period of instability from January 5, 2004 through December 31, 2008. Following Kuttner (2001), I use the change in the one-day current-month futures rate at a given date to measure monetary policy news. Using EGARCH model, my results suggest that these shocks are an important driver of the oil market. I find that the volatility reacts in a statistically significant and economically relevant fashion to surprise changes in the target rate. The estimated effect on the volatility is positive. Moreover, I show that the daily changes in federal funds futures rates don’t have any role in the dynamics of oil volatility during the sample period. Finally, I also show that all model parameters to be highly significant with higher volatility persistence. Keywords: federal open market committee; FOMC; US monetary policy surprises; oil returns; conditional variance; EGARCH. Reference to this paper should be made as follows: Chebbi, T. (2018) ‘The response of oil market to US monetary policy surprises’, Int. J. Economic Policy in Emerging Economies, Vol. 11, Nos. 1/2, pp.159–168. Biographical notes: Tarek Chebbi is an Associate Professor of Finance at Faculty of Economic Sciences and Management of Sousse, Tunisia. His research interests are financial markets, energy and commodity finance. He obtained a PhD from Tunis University, Tunisia. His research has been published in journals such as International Journal of Monetary Economics and Finance, International Journal of Trade and Global Markets, IUP Journal of Financial Risk Management, Journal of Energy Markets and Journal of Asset Management. 1 Introduction Throughout the last decade, commodity markets have experienced an exceptional volatility and different phases of evolution. One possible explanation of the behaviour of commodity prices is the influence of monetary policy actions on commodity markets. 1 In early study, Frankel and Hardouvelis (1985) highlight a close link between news related to monetary policy and commodity prices. A related channel has been discussed by Frankel (1986), who shows in a theoretical model that monetary policy shocks has important effects on agricultural commodity prices. More recently, Barsky and Kilian (2002) document that the oil price increases appear to be strongly related to global