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Examining crude oil price - Exchange rate nexus for India during the period of extreme oil price volatility

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  • Ghosh, Sajal
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    Abstract

    This study probes crude oil price - exchange rate nexus for India using daily data for the time span July 2, 2007-November 28, 2008. Generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) models have been employed to examine the impact of oil price shocks on nominal exchange rate. The study reveals that an increase in the oil price return leads to the depreciation of Indian currency vis-à-vis US dollar. The study also establishes that positive and negative oil price shocks have similar effects, in terms of magnitude, on exchange rate volatility and oil price shocks have permanent effect on exchange rate volatility.

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    Bibliographic Info

    Article provided by Elsevier in its journal Applied Energy.

    Volume (Year): 88 (2011)
    Issue (Month): 5 (May)
    Pages: 1886-1889

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    Handle: RePEc:eee:appene:v:88:y:2011:i:5:p:1886-1889

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    Related research

    Keywords: GARCH Oil price Exchange rate India;

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    Cited by:
    1. Libo Yin & Liyan Han, 2013. "Exogenous Shocks and Information Transmission in Global Copper Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(8), pages 724-751, 08.
    2. Akbar Komijani & Nadiya Gandali Alikhani & Esmaeil Naderi, 2013. "The Long-run and Short-run Effects of Crude Oil Price on Methanol Market in Iran," International Journal of Energy Economics and Policy, Econjournals, vol. 3(1), pages 43-50.
    3. Delavari, Majid & Gandali Alikhani, Nadiya, 2012. "The Effect of Crude Oil Price on the Methanol price," MPRA Paper 49727, University Library of Munich, Germany.
    4. Zied Ftiti & Aviral Tiwari & Ibrahim Fatnassi, 2014. "Oil price and macroeconomy in India - An evolutionary cospectral coherence approach," Working Papers 2014-068, Department of Research, Ipag Business School.
    5. Bouoiyour, Jamal & Selmi, Refk, 2014. "GCC Countries and the Nexus between Exchange Rate and Oil Price: What wavelet decomposition reveals?," MPRA Paper 55871, University Library of Munich, Germany.
    6. Selmi, Refk & Bouoiyour, Jamal & Ayachi, Fethi, 2012. "Another Look at the Interaction Between Oil Price Uncertainty and Exchange Rate Volatility: The Case of Small Open Economies," MPRA Paper 49144, University Library of Munich, Germany, revised Oct 2012.
    7. Delavari, Majid & Gandali Alikhani, Nadiya, 2013. "The Dynamic Effects of Crude Oil and Natural Gas Prices on Iran's Methanol," MPRA Paper 49733, University Library of Munich, Germany.
    8. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2013. "The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework," Energy Economics, Elsevier, vol. 40(C), pages 714-733.
    9. Salisu, Afees A. & Mobolaji, Hakeem, 2013. "Modeling returns and volatility transmission between oil price and US–Nigeria exchange rate," Energy Economics, Elsevier, vol. 39(C), pages 169-176.
    10. Delavari, Majid & Gandali Alikhani, Nadiya & Naderi, Esmaeil, 2012. "The analyses of Crude Oil and Natural Gas Prices on Petrochemicals Products: A Case Study of IRAN's Methanol," MPRA Paper 48788, University Library of Munich, Germany.
    11. Zhang, Yue-Jun & Wang, Zi-Yi, 2013. "Investigating the price discovery and risk transfer functions in the crude oil and gasoline futures markets: Some empirical evidence," Applied Energy, Elsevier, vol. 104(C), pages 220-228.
    12. Zahid Muhammad & Hassan Suleiman & Reza Kouhy, 2011. "Exploring oil price – exchange rate nexus for Nigeria," FIW Working Paper series 071, FIW.

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