Oil price shocks and exchange rate movements

Volkov, Nikanor; Yuhn, Ky-Hyang

doi:10.1016/j.gfj.2016.11.001

Cited by 64 publications

(25 citation statements)

References 23 publications

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“…Then, the log-differentials of these ratios of macroeconomic variables are obtained as LOIL t , LRINT t , LRCPI t , and LRIPI t . The relative differences of these fundamental variables between the two countries are expected to affect US exchange rates in Korea, as confirmed by Volkov and Yuhn [9]. However, this study regards the variable ratio between the two countries, instead of their direct differences like the study of Volkov and Yuhn [9], because the Korean exchange rates are expressed as ratios with the US dollars as its denominator.…”

Section: Methodsmentioning

confidence: 86%

“…Second, not only oil prices but also macroeconomic factors such as price levels, income, and interest rates are the major factors that influence the exchange rates. Except for Volkov and Yuhn [9] and Basher et al [11], most studies have analyzed only the direct relationship between oil prices and exchange rates. This study analyzes the effects of oil prices on exchange rates in each regime under the correlation with these macro-economic variables.…”

Section: Authors Countries Periods Methods Main Resultsmentioning

confidence: 99%

“…Recently, Volkov and Yuhn [9] identified some relevant factors that affect the exchange rates between the United States and the corresponding countries on the basis of the monetary model of exchange rates determination. The fundamental factors include interest rates differentials, income (or production) differentials, and inflation rates differentials between two countries.…”

Section: Methodsmentioning

confidence: 99%

“…We consider some relevant variables that affect the exchange rates between Korea and the USA as in Volkov and Yuhn [9]. Oil prices are added to the fundamental factors including interest rates differentials, production differentials, and inflation rates differentials between the two countries.…”

Section: Methodsmentioning

confidence: 99%

See 3 more Smart Citations

Analyzing Oil Price Shocks and Exchange Rates Movements in Korea using Markov Regime-Switching Models

Kim

Choi

2019

Energies

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Korea imports all of its crude oil, and is the world's fifth largest oil importing country. We analyze the effects of oil prices, interest rates, consumer price indexes (CPIs), and industrial production indexes (IPIs) on the regime shift behavior of the Korean exchange rates against the USA from January 1991 to March 2019. We use the Markov regime switching model (MRSM) to detect the regime shift behavior of the movements of Korean exchange rates. In order to select the optimal MRSM, we fit a total of 30 models considering four explanatory variables. The selected model based on Akaike information criteria (AIC) and maximum log likelihood (MLL) includes the log-differentials of oil prices, the log-differentials of CPIs compared to those of the US, and its own auto-regressive terms. Based on the selected MRSM model, throughout all markets, we find evidence to support the existence of two distinct regimes: a stable regime with low-volatility, and an unstable regime with high-volatility. The regime with high-volatility includes the Asian financial crisis of 1997 and the global financial crisis of 2008-2009 in the Korean exchange rates market. In the regime with low-volatility, the Korean exchange rates are not significantly influenced by any of the explanatory variables, except for its own auto-regressive terms. In the regime with high-volatility, the Korean exchange rates are significantly influenced by the CPIs and oil prices. The transition probability from the regime with low-volatility to the regime with high-volatility is about ten times that of the opposite case.

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Section: Methodsmentioning

confidence: 86%

Section: Authors Countries Periods Methods Main Resultsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

See 2 more Smart Citations

Analyzing Oil Price Shocks and Exchange Rates Movements in Korea using Markov Regime-Switching Models

Kim

Choi

2019

Energies

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“…The first group assumes the pass through of change in oil price to exchange rate to be symmetric, hence linear econometric models were employed. Studies by Pershin, et al (2016) ;Brahmasrene, et al (2014); Volkov and Yuhn (2016) ;Hussain, et al (2017) among others fall under this category. On the other hand, studies by Buetzer et al (2012); Abed et al (2016); Ahmad and Hernandez (2013); Tiwari and Albulescu (2016); Atems, et al (2015) among others assumes the pass through to be asymmetric and therefore employed non-linear models for analysis.…”

mentioning

confidence: 99%

Oil Price and Exchange Rate Nexus in Nigeria: Are there Asymmetries

Abubakar

2019

CBN-JAS

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This paper examines the dynamics in the relationship between oil price and exchange rate in Nigeria by utilizing monthly data spanning January 1986 to June 2018. It specifically determines asymmetries in the relationship between oil price and exchange rate and the effect of oil price shocks on exchange rate. Threshold Autoregressive (TAR), Momentum Threshold autoregressive (MTAR) and Structural Vector Autoregressive (SVAR) models were employed for the analysis. Findings of TAR and MTAR models confirm the absence of asymmetric cointegration, hence leading to the conclusion that in the case of Nigeria, there are no asymmetries in the relationship between oil price and exchange rate. Findings from the SVAR model show gradual appreciation (though with some time lag) of naira following positive shocks to oil price. The study recommends among others the need for diversification of foreign exchange earnings base of the economy, so as to minimise the effect of negative shocks to oil price.

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Revealing the nexus between oil and exchange rate in the major emerging markets—The timescale analysis

2018

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This paper investigates the interrelationship between Brent oil price and exchange rate in 10 emerging markets of East Europe, Asia, Africa, and South America. For computational purpose, we apply two innovative methodologies—wavelet coherence and phase difference that are capable of observing different frequency scales. Wavelet coherence results suggest that strong coherence is present during world financial crisis (WFC) in the oil‐exporting countries and in majority of the oil‐importing countries. Phase arrows as well as phase difference suggest negative coherence between oil and exchange rates in the oil‐importing countries during WFC. Negative coherence is found in these countries because currency depreciation was accompanied by immense oil price drop in WFC period. In addition, phase difference has relatively stable in‐phase dynamics in long term in the oil‐importing countries during tranquil periods, which confirms theoretical stance that higher oil prices cause currency depreciation and vice versa. As for the oil‐exporting countries, we find constant and relatively long‐lasting anti‐phase pattern in Russian and Nigerian cases for long‐term horizons but not for Brazilian one.

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Oil price shocks and exchange rate movements

Cited by 64 publications

References 23 publications

Analyzing Oil Price Shocks and Exchange Rates Movements in Korea using Markov Regime-Switching Models

Analyzing Oil Price Shocks and Exchange Rates Movements in Korea using Markov Regime-Switching Models

Oil Price and Exchange Rate Nexus in Nigeria: Are there Asymmetries

Revealing the nexus between oil and exchange rate in the major emerging markets—The timescale analysis

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