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The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework

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  • Tiwari, Aviral Kumar
  • Mutascu, Mihai Ioan
  • Albulescu, Claudiu Tiberiu

Abstract

The purpose of this paper is to assess the empirical influence of oil prices on the real effective exchange rate in Romania in a wavelet transform framework. More precisely, we investigate to what extent oil prices impact the real effective exchange rate in an Eastern European transition country, characterised by a low level of retail fuel prices and by an important growth rate of these prices as compared to the other EU countries. For this purpose we use a discrete wavelet transform approach and scale-by-scale Granger causality tests. We find that oil prices have a strong influence on the real effective exchange rate in the short run, but also for large time horizons. These results are important considering the fact that, in a classical Granger causality linear framework for the entire sample, we find that oil prices have no influence on the real effective exchange rate. The findings remain robust when resampling the initial 1986–2009 period, or when we use an alternative continuous wavelet transform. In addition, we discover that mainly the positive shocks associated with an increase in oil prices have an impact upon the real effective exchange rate movements in the short and long runs.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 40 (2013)
Issue (Month): C ()
Pages: 714-733

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Handle: RePEc:eee:eneeco:v:40:y:2013:i:c:p:714-733

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Web page: http://www.elsevier.com/locate/eneco

Related research

Keywords: Oil prices; Exchange rate nexus; Wavelet cross-correlation; Granger causality; Romania;

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Cited by:
  1. Rita Sousa & Luís Aguiar-Conraria & Maria Joana Soares, 2014. "Carbon Financial Markets: a time-frequency analysis of CO2 price drivers," NIPE Working Papers 03/2014, NIPE - Universidade do Minho.
  2. 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.

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