Analyzing the (a)symmetric impacts of oil price, economic policy uncertainty, and global geopolitical risk on exchange rate

Kisswani, Khalid M.; Elian, Mohammad I.

doi:10.1016/j.jeca.2021.e00204

Cited by 47 publications

(22 citation statements)

References 52 publications

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“…The roles of monetary and scal authorities are also observed to complement the roles of exchange rate depreciation and international oil price shock in increasing energy in ation. Remarkably, global geopolitical risk has been found to have a long-run relationship with and long-run effects on exchange rates (Duan et al, 2021;Kisswani & Elian, 2021).…”

Section: Literaturementioning

confidence: 99%

“…Increase in energy price has been differentiated from the increase in the prices of other commodities because of the sharp and sustained rise in energy prices that occur at a unique time (Kilian, 2008). This is attributed to the fact that uncertainty puts pressure on major energy prices, which are mainly priced in US dollar and the exchange rate variability (Kisswani & Elian, 2021). For net importers of energy commodities, it puts pressure on their import bills (Haider, Ahmed & Jawed, 2014).…”

Section: Introductionmentioning

confidence: 99%

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Does Geopolitical Risk Trigger Energy Inflation in the European Economic Area? Evidence from a Panel Time-Varying Regression

Olasehinde‐Williams

Olanipekun²,

Usman

2023

Preprint

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This paper examines the reaction of energy inflation to geopolitical risks in the European Economic Area between 1990 and 2015. The paper is an attempt to reveal the time-varying characteristics of the relationship by applying the nonparametric time-varying coefficient panel data model with fixed effects. In addition, to further reveal potential tail effects that may not have been captured by conditional mean-based regressions, the method of moments quantile regression was also employed. Conclusions reached on the basis of the findings are as follows; first, as these European countries get exposed to geopolitical tensions, it is expected that energy prices will surge. Second, the study shows that the ability of geopolitical risk to trigger energy inflation in recent times is not as powerful as it used to be. Third, results reveal that countries that are already better at managing inflation, when exposed to more geopolitical risks, experience smaller increases in energy inflation. On the other hand, countries that are already struggling with inflation control, when exposed to more geopolitical risk, experience even greater energy inflation. Overall, the study findings lead us to the conclusion that transitioning from non-renewable to renewable energy use is one channel through which the sampled countries can battle the energy inflation which geopolitical risks trigger. A sound macroeconomic policy for inflation control is a complementary channel through which the same goal can be achieved.

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Section: Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Does Geopolitical Risk Trigger Energy Inflation in the European Economic Area? Evidence from a Panel Time-Varying Regression

Olasehinde‐Williams

Olanipekun²,

Usman

2023

Preprint

View full text Add to dashboard Cite

show abstract

“…Studies with meaningful findings on the linkages of geopolitical risk (GPR) with national currencies have been brought to the surface. Kisswani and Elian (2021), Iyke et al (2022), Kyriazis and Economou (2021) and Duan et al (2021) are among the influential studies on this topic. Kisswani and Elian (2021) reveal that the global geopolitical risk index exerts short-run asymmetric impacts on the national currencies of the Republic of Korea and the United Kingdom.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Kisswani and Elian (2021), Iyke et al (2022), Kyriazis and Economou (2021) and Duan et al (2021) are among the influential studies on this topic. Kisswani and Elian (2021) reveal that the global geopolitical risk index exerts short-run asymmetric impacts on the national currencies of the Republic of Korea and the United Kingdom. In addition, evidence shows that this index triggers symmetric long-run influences on all the five currencies examined.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal Portfolios of National Currencies, Commodities and Fuel, Agricultural Commodities and Cryptocurrencies during the Russian-Ukrainian Conflict

Kyriazis

2022

IJFS

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This study sets out to explore the impacts of the Russian-Ukrainian conflict on worldwide financial markets by considering a large array of national currencies, precious metals and fuel, agricultural commodities and cryptocurrencies. Estimations span the period since the Russian invasion until the takeover of the Ukrainian city of Mariupol. Optimal portfolios are constructed for separate categories of financial assets for different levels of risk-aversion by investors. The Chinese yuan, gold, corn, soybeans, sugar and Bitcoin prove to be safe haven investments while the Japanese yen, natural gas, wheat and the combination of Bitcoin and Ethereum offer profit opportunities for risk-seekers. Notably, the agricultural commodities’ portfolio is the best performing while the cryptocurrency portfolio generates the worst risk-return trade-off. National currencies could act as safe havens in the place of gold when all types of assets can be combined. Natural gas is revealed to be the most reliable profit generator. Overall, high risk appetite does not result in large improvement in portfolios’ returns. This study sheds light on investors’ optimal decision-making during elevated geopolitical uncertainties and provides a compass for improving welfare.

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“…For example, Bartsch ( 2019 ) used GARCH models based on the daily frequency data and concluded that EPU has a stronger effect on the exchange rate when daily data is used. Using the nonlinear ARDL model, Kisswani and Elian ( 2021 ) examined the effect of oil prices, economic policy uncertainty, and geopolitical risk on the exchange rate volatility in the UK, Republic of Korea, Japan, China, and Canada. Their findings conclude that these variables significantly affect the exchange rate in some countries whereas insignificantly affect in other countries.…”

Section: Introductionmentioning

confidence: 99%

Exchange rate response to economic policy uncertainty: evidence beyond asymmetry

Chang

Derindağ

Hacıevliyagil

et al. 2022

Humanit Soc Sci Commun

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Recent studies have examined the relationship between economic policy uncertainty and exchange rate. We contribute to this literature by considering the effect of minor positive and major positive changes as well as minor negative and major negative changes in the economic policy uncertainties on the exchange rates. In this regard, we use a recently developed multiple asymmetric threshold nonlinear ARDL model along with Granger causality in quantile test. Our estimates support the asymmetric effect in three countries only when an asymmetric ARDL model is used. However, these estimates support asymmetric effects for all the sample countries when the multiple asymmetric threshold nonlinear ARDL model is used. Moreover, the effect varies across various quantiles when Granger causality in quantile test is used. Overall, the extended model helps us to examine more minutely the impact of EPU and GEPU on the exchange rate in G7 countries. The results of this study can be useful for the central banks to devise appropriate policies to intervene in the foreign exchange market.

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Analyzing the (a)symmetric impacts of oil price, economic policy uncertainty, and global geopolitical risk on exchange rate

Cited by 47 publications

References 52 publications

Does Geopolitical Risk Trigger Energy Inflation in the European Economic Area? Evidence from a Panel Time-Varying Regression

Does Geopolitical Risk Trigger Energy Inflation in the European Economic Area? Evidence from a Panel Time-Varying Regression

Optimal Portfolios of National Currencies, Commodities and Fuel, Agricultural Commodities and Cryptocurrencies during the Russian-Ukrainian Conflict

Exchange rate response to economic policy uncertainty: evidence beyond asymmetry

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