Assessing the Asymmetric Effect of Local Realized Exchange Rate Volatility and Implied Volatilities in Energy Market on Exchange Rate Returns in BRICS

Abstract

This paper investigates the leverage effect of local realised exchange rate volatility and implied volatilities in energy market on exchange rate returns in BRICS for the period May 7, 2012 to March 31, 2022, using the quantile regression technique. This paper reveals that oil implied volatility shocks (OVX changes) have a significant negative impact on Russian-U.S. Dollar exchange rate returns in all quantiles. When it comes to the Indian rupee and Chinese RMB returns/Dollar, the adverse effects of OVX are most apparent in both normal and booming market conditions. Although South Africa's currency rate returns are affected by both slump- and bust-market situations, Brazil also tends to be in higher quantiles. The implied volatility indices in the energy market have a substantial and considerable negative impact on the BRICS currencies, with the exception of China, where the effect is only noticeable in the upper extreme quantiles. The policy implications and suggestions are discussed.

The Effects of Exchange Rate Fluctuation on Bangladeshi Exports: An ARDL Bound Testing Technique

“…Over the years, there has been a lot of debate over the evidence regarding both the positive and negative impacts of currency rate fluctuation on a country's exports. Significant amounts of previous studies suggested that currency rate fluctuation have negative impacts on a country's export (Muinelo-Gallo et al, 2020;Jyoti, 2021;Thorbecke, 2012;Tarasenko, 2021) while some of the research have shown positive impacts of currency rate fluctuation on a country's exports (Hasan et al, 2015;Umaru et al, 2018;Pun, 2020;Qabhobho, 2023;Shabbir et al, 2023;Habanabakize and Dickason-Koekemoer, 2023;Lezar, 2023) as well as few study founds that currency rate fluctuation has no impact on a country's export (Nyeadi, 2014). Hooper and Kohlhagen (1978) claimed that increased currency rate fluctuation has a detrimental impact on business because people do not wants to take risk.…”