Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently ? A wavelet coherence analysis

Yang, Lu; Cai, Xiao Jing; Hamori, Shigeyuki

doi:10.1016/j.iref.2017.03.015

Cited by 170 publications

(81 citation statements)

References 43 publications

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“…The obvious examples are rouble, real, naira, won, rupiah, rand, and zloty. Our results coincide with the findings of Yang et al () and Lin, Chen, and Yang (), who applied the same methodology and found stronger interdependence between oil and exchange rate in 2008–2010 period. At the same time, these studies also reported that high coherence areas proved to be non‐existent in the periods before and after WFC at all wavelet scales, which is in line with our findings.…”

Section: Wtc Resultssupporting

confidence: 92%

“…All these findings, regarding both oil‐importing and oil‐exporting countries, are in line with the contention of Yang et al (), who claimed that most phase patterns for the oil‐exporting countries are anti‐phase, indicating a negative relationship between the returns in oil price and exchange rates, whereas the patterns of the oil‐importing countries are more in‐phase, which suggests positive nexus.…”

Section: Phase Difference Resultssupporting

confidence: 90%

“…All these findings, regarding both oil-importing and oil-exporting countries, are in line with the contention of Yang et al (2017), who claimed that most phase patterns for the oil-exporting countries are anti-phase, indicating a negative relationship between the returns in oil price and exchange rates, whereas the patterns of the FIGURE 5 Phase difference circle. FX denotes foreign exchange rate FIGURE 6 Phase difference plots between Brent oil price and the selected currencies at 128-512 days frequency band oil-importing countries are more in-phase, which suggests positive nexus.…”

Section: Phase Difference Resultssupporting

confidence: 87%

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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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Section: Wtc Resultssupporting

confidence: 92%

Section: Phase Difference Resultssupporting

confidence: 90%

Section: Phase Difference Resultssupporting

confidence: 87%

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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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“…Yang et al . () found that in oil‐importing and oil‐exporting countries, the comovement relationship between crude oil price and exchange rates deviates over time. Strong heterogenous link was found between the variables around the year 2008 for oil‐importing countries and 2005 onward for oil‐exporting countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Mensah et al (2017) for group of oil-exporting countries showed an evidence of long-run equilibrium between exchange rates of euro, Indian rupee, Russian ruble, South African rand, Ghanaian cedi and the Nigerian naira and oil price shocks which is more proven in the post-crisis period where the exchange rate and oil price experienced an increase. Yang et al (2017) found that in oil-importing and oil-exporting countries, the comovement relationship between crude oil price and exchange rates deviates over time. Strong heterogenous link was found between the variables around the year 2008 for oil-importing countries and 2005 onward for oil-exporting countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Oil price, trade openness, current account balances and the official exchange rate in Nigeria

et al. 2019

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Since a larger percentage of government revenue are generated from crude oil trade, the fluctuations in the price of oil have always been influencing the budget financing in Nigeria. Also, investment decisions and trade cost are been influenced by the status of the oil price. The study investigates the relationship between oil price, trade openness, current account balances and official exchange rate in Nigeria using secondary data from 1980 through 2016. The non‐linear auto‐regressive distributed lag (NARDL) was used to analyse the short‐run and long‐run link between the variables. From the findings, it was established that in the short run and long run, trade openness negatively impacts on the official exchange rate of naira to dollar in Nigeria. The consumer price index positively and significantly influences exchange rate value in Nigeria in the short run and long run. Positive changes in oil price impacted negatively on official exchange rate in the short run, but in the long run had a positive impact. Negative changes in the price of oil have a positive insignificant and negative significant impact on official exchange rate in the short run and long run, respectively. The error correction result verified that the variables (trade openness, current account, oil price and consumer price index) correct 91 per cent deviations of exchange rate from short‐run equilibrium back to equilibrium in the long run. The study concludes that trade policy in Nigeria is not in favourable direction of official exchange rate in Nigeria. Also, positive changes in oil price and current account balances are strong determinants of the Nigerian official exchange rate of naira to dollar in the long run. Therefore, it is recommended that trade policies should be reviewed in Nigeria towards enhancing other sectors that would add more value to naira.

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Industry variance risk premium, cross‐industry correlation, and expected returns

Zhu

Luo

2022

Journal of Futures Markets

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We investigate the variance risk premium (VRP) and implied correlation (IC) at the industry level. Using the index and sector exchange-traded fund options, we construct-sector VRPs and cross-sector IC measures. Sector VRPs predict sector returns, and adding the average sector VRP with IC improves predictability. Combining the average sector VRP and IC outperforms the market VRP in predicting market returns both in-sample and out-of-sample and generates sizeable economic values. We document a strong spillover effect from sector VRPs to the market VRP. The average sector VRP and cross-sector IC contain information beyond the market VRP and cross-stock IC.

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Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently ? A wavelet coherence analysis

Cited by 170 publications

References 43 publications

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

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

Oil price, trade openness, current account balances and the official exchange rate in Nigeria

Industry variance risk premium, cross‐industry correlation, and expected returns

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