Analyzing the volatility spillover and cointegration relationship between daily spot West Texas intermediate crude oil price and US dollar

Abstract

In the study, the spillover and Cointegration Relationship between the Daily Spot West Texas Intermediate Crude Oil Price and the US Dollar is analyzed for the period from March 2016 to December 2021. After extensive literature review, econometric analysis was started. In the first part of the analysis, the relationships between the variables were analyzed with the ARDL bounds test approach as short, long and short-term, and the existence of a cointegration relationship was reached. According to the results obtained, the effect of crude oil prices on exchange rate volatility in the long run is negative and statistically significant. In the short-term analysis, the error correction term was found to be statistically significant and negative within expectations. In this context, the deviations among the variables approach the long-run equilibrium level. According to the results of causality and variance causality analysis applied to the variables in the last part of the analysis, it is understood that there is a volatility spillover effect from crude oil prices to exchange rates.