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A directional analysis of oil prices and real exchange rates in BRIC countries

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  • Baghestani, Hamid
  • Chazi, Abdelaziz
  • Khallaf, Ashraf

Abstract

Numerous studies provide evidence in favor of oil prices as a dominant factor influencing real exchange rates but note variations across countries and time. In this study, we examine whether the change in oil prices accurately predicts the direction of change in the real effective exchange rates of BRIC countries (Brazil, Russia, India, and China) for 1994–2017. Our findings indicate that, unlike for 1994–2007, the change in oil prices accurately predicts the direction of change in the real exchange rates of Brazil and Russia (India) for 2008–2017 (2008–2012). As for the real exchange rate of China, oil prices display no directional predictive power either for the period before or after the 2008 global financial crisis. We conclude by offering some insights regarding the different findings across BRIC countries.

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  • Baghestani, Hamid & Chazi, Abdelaziz & Khallaf, Ashraf, 2019. "A directional analysis of oil prices and real exchange rates in BRIC countries," Research in International Business and Finance, Elsevier, vol. 50(C), pages 450-456.
    • Handle: RePEc:eee:riibaf:v:50:y:2019:i:c:p:450-456
    DOI: 10.1016/j.ribaf.2019.06.013
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    More about this item

    Keywords

    BRIC; Oil prices; Foreign exchange; Directional association; Asymmetric loss;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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