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Oil price and exchange rate in India: Fresh evidence from continuous wavelet approach and asymmetric, multi-horizon Granger-causality tests

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  • Tiwari, Aviral Kumar
  • Albulescu, Claudiu Tiberiu

Abstract

We use a continuous wavelet approach and deploy asymmetric, multi-horizon Granger-causality tests between the return series of the oil price and the India-US exchange rate, over the time-span 1980M1–2016M2. The results highlight important co-movements in the post-reform period, especially for the 2–4-years band. The wavelet Granger-causality tests show that the exchange rate Granger-causes the oil price in the long run, while the opposite applies in the short run. Moreover, we find that the Granger-causal relationship between variables is non-linear, asymmetric and indirect, which will help policymakers and traders to make better strategic and investment decisions.

Suggested Citation

  • Tiwari, Aviral Kumar & Albulescu, Claudiu Tiberiu, 2016. "Oil price and exchange rate in India: Fresh evidence from continuous wavelet approach and asymmetric, multi-horizon Granger-causality tests," Applied Energy, Elsevier, vol. 179(C), pages 272-283.
    • Handle: RePEc:eee:appene:v:179:y:2016:i:c:p:272-283
    DOI: 10.1016/j.apenergy.2016.06.139
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    More about this item

    Keywords

    Cyclical and anti-cyclical effects; Wavelet coherence; Oil price-exchange rate; Granger causality; India;
    All these keywords.

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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