Oil prices, stock returns, and exchange rates: Empirical evidence from China and the United States

Bai, Shuming; Koong, Kai S.

doi:10.1016/j.najef.2017.10.013

Cited by 80 publications

(48 citation statements)

References 41 publications

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“…This indicates that individual severe shocks from China's bulk commodity markets are likely to increase the uncertainty of international crude oil markets. Our conclusion is consistent with the research on the relationship of crude oil markets and the Chinese stock market (Bai and Koong, 2018;Wang and Wang, 2019). There is no doubt that with the opening and development of China's financial market, its influence on the international financial market is increasing.…”

Section: Dynamic Spillovers Between Crude Oil Prices and China's Bulksupporting

confidence: 91%

Dynamic Spillovers Between International Crude Oil Market and China's Commodity Sectors: Evidence From Time-Frequency Perspective of Stochastic Volatility

2020

Front. Energy Res.

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We study the time-frequency dynamics of stochastic volatility spillovers between international crude oil markets and China's commodity sectors in the spectral representation framework of generalized forecast error variance decomposition (GFEVD). We find evidence that international crude oil markets has significant volatility spillover effects on China's bulk commodity markets, and the volatility spillovers are sensitive to extreme geopolitical or financial events. The net spillovers of international oil markets are almost positive and driven mainly by short-term components (within a week). However, uncertain financial factors from China such as the market-oriented reform in 2013 and the stock disaster in 2015 adversely affect the net oil-commodity volatility spillovers through the medium-term components (week to a month) and long-term components (month to a year). Moreover, the volatility spillover effects of crude oil prices on different commodity sectors in China are heterogeneous. Metal, coal coke, and steel ore and energy commodity sectors are more affected by crude oil prices, whereas nonmetal building materials and agricultural commodities are less affected. These outcomes implement necessary implications for investors and policymakers.

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Section: Dynamic Spillovers Between Crude Oil Prices and China's Bulksupporting

confidence: 91%

Dynamic Spillovers Between International Crude Oil Market and China's Commodity Sectors: Evidence From Time-Frequency Perspective of Stochastic Volatility

2020

Front. Energy Res.

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“…Furthermore, an appreciation of Mexican peso can also be caused by higher oil prices. A study conducted by Bai and Koong (2018) about the relationships of China and the U.S through oil price, stock market and exchange rate from the period of 1991 to 2015. Sari et al (2010) highlighted that gold price, exchange rate and oil price have a short-run relationship only.…”

Section: Stock Index Oil Price Gold Price and Exchange Ratementioning

confidence: 99%

Interdependencies of Stock Index, Oil Price, Gold Price and Exchange Rate: A Case Study of Pakistan

Bakhsh¹,

Khan²

2019

IJELCS

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The core objective of the research conducted is to explore the interactions of the stock index, gold price, crude oil price and exchange rate in Pakistan from September 1997 to April 2018. The interaction is examined by concurrent equations. For analyzing the trend of Pakistan economy, unit root test, correlation test, co-integration technique, vector autoregressive model, granger test is done. The result indicates the absence of a long-run relationship among all of the variables. However, results demonstrate the signif icant effect of crude oil price & Gold price on the exchange rate. Whereas, Pakistan stock market is affected by the exchange rate. Recommendations for the government are given to give more focus on economic policies for the crude oil price, stock index, gold price and exchange rate to make them stable in the country. The study is tremendously benef icial for high authorities in the business, policy and decision-maker in the country and as well as investors because they can predicate and able to understand the fluctuation of these variables in the economy. Statistical software used for this study is EVIEWS 9th edition.

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“…It has also been generally recognized that one of main international transmission channels of exchange rates operates through stock markets due to the rising volume of international trade among firms quoted in stock markets. In this respect, [37] investigated the relationship between exchange rates and stock markets by the inclusion of oil prices and global economic activity into their empirical model. More specifically, they employed a Structural VAR (SVAR) and a trivariate DIAGONAL BEKK GARCH model to analyze the interactions among exchange rate changes, and stock market returns in China and the US from February 1991 to December 2015.…”

Section: Literature Reviewmentioning

confidence: 99%

“…More specifically, they employed a Structural VAR (SVAR) and a trivariate DIAGONAL BEKK GARCH model to analyze the interactions among exchange rate changes, and stock market returns in China and the US from February 1991 to December 2015. Bai and Koong [37] found that there was a significant parallel inverse relation between the US stock market and the dollar and between the China stock market and the exchange rate. Furthermore, the possible impacts of exchange rates on international trade can be studied within logistics perspective.…”

Section: Literature Reviewmentioning

confidence: 99%

Impacts of Exchange Rate Volatility on Macroeconomic and Financial Variables: Empirical Evidence from PVAR Modeling

Özçelebi¹

2018

Trade and Global Market

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In this study, Panel Vector Autoregression (PVAR) models are used to determine the impacts of exchange rate volatility on industrial production growth rate, consumer price inflation, short-term interest rates and stock returns for 10 OECD countries. The variance decompositions (VDCs) found that exchange rate volatility can be a secondary factor for the variations in immediate interest rates, implying that Uncovered Interest Rate Parity (UIP) condition should be analyzed by the inclusion of other macroeconomic variables. Impulse response functions (IRFs) expose that volatility in exchange rates can have a positive impact on the liquidity conditions in money market and an increase in real economic activity because investors have to move their money away from currency markets to money markets. The relatively lower impact of exchange rate volatility may arise from the zero bound problem, thus it is emphasized that the examination of impacts on exchange rate volatility on macroeconomics variables should be made both considering conventional and unconventional monetary policy. Although impulse response functions (IRFs) did not detect the significant impact of exchange rate volatility on inflation, VDCs obtained supporting results to exchange rate pass-through (ERPT). I suggest that the monetary policy to be developed should clarify alternative channels that exchange rate may affect inflation.

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Oil prices, stock returns, and exchange rates: Empirical evidence from China and the United States

Cited by 80 publications

References 41 publications

Dynamic Spillovers Between International Crude Oil Market and China's Commodity Sectors: Evidence From Time-Frequency Perspective of Stochastic Volatility

Dynamic Spillovers Between International Crude Oil Market and China's Commodity Sectors: Evidence From Time-Frequency Perspective of Stochastic Volatility

Interdependencies of Stock Index, Oil Price, Gold Price and Exchange Rate: A Case Study of Pakistan

Impacts of Exchange Rate Volatility on Macroeconomic and Financial Variables: Empirical Evidence from PVAR Modeling

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