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On the relation between crude oil prices and exchange rates in sub-saharan African countries: A nonlinear ARDL approach

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  • Jungho Baek
  • Hong-Youl Kim

Abstract

This article examines the effect oil price fluctuations have on exchange rates in selected sub-Saharan African (SSA) countries. To investigate the subject thoroughly, unlike previous studies we take specific account of the asymmetric effects of oil price changes in our modeling process, using the nonlinear autoregressive distributed lag (NARDL) model proposed by Shin et al. [2014. “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” In Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, edited by R. Sickels, and W. Horrace, 281–314. New York: Springer.] The results provide strong evidence that changes in oil prices have the asymmetric effects on the real exchange rates in the long-run; that is, the movements in the real exchange rates in selected SSA countries appear to respond mostly more to oil price increases than to decreases. In the short-run, on the other hand, the asymmetry of oil price changes is not observed.

Suggested Citation

  • Jungho Baek & Hong-Youl Kim, 2020. "On the relation between crude oil prices and exchange rates in sub-saharan African countries: A nonlinear ARDL approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(1), pages 119-130, January.
    • Handle: RePEc:taf:jitecd:v:29:y:2020:i:1:p:119-130
    DOI: 10.1080/09638199.2019.1638436
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    Cited by:

    1. Hlongwane, Nyiko Worship, 2022. "The relationship between oil prices and exchange rates in South Africa," MPRA Paper 113209, University Library of Munich, Germany.
    2. Baek, Jungho, 2022. "Does COVID-19 play any role in the asymmetric relationship between oil prices and exchange rates? Evidence from South Korea," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 553-559.
    3. Sokhanvar, Amin & Çiftçioğlu, Serhan & Lee, Chien-Chiang, 2023. "The effect of energy price shocks on commodity currencies during the war in Ukraine," Resources Policy, Elsevier, vol. 82(C).
    4. Jassim Aladwani, 2023. "Wavelet Coherence and Continuous Wavelet Transform - Implementation and Application to the Relationship between Exchange Rate and Oil Price for Importing and Exporting Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 531-541, July.
    5. Kyophilavong, Phouphet & Abakah, Emmanuel Joel Aikins & Tiwari, Aviral Kumar, 2023. "Cross-spectral coherence and co-movement between WTI oil price and exchange rate of Thai Baht," Resources Policy, Elsevier, vol. 80(C).
    6. Baek, Jungho, 2023. "Supply and demand shocks in the global oil market: How much do they matter for exchange rates in OPEC members?," Resources Policy, Elsevier, vol. 81(C).
    7. Zhang, Xiang & Baek, Jungho, 2022. "The role of oil price shocks on exchange rates for the selected Asian countries: Asymmetric evidence from nonlinear ARDL and generalized IRFs approaches," Energy Economics, Elsevier, vol. 112(C).
    8. Fatma Kizilkaya, 2021. "Relationship Between Oil Prices and Real-Exchange Rate in Turkey: An Investigation Using Asymmetric Fourier Causality Analysis," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 71(71-2), pages 549-568, December.
    9. Nyiko Worship Hlongwane & Olebogeng David Daw & Leeto Shogole & Selinah Ribese, 2022. "Exchange Rate Volatility and Oil Prices in South Africa," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 315-322, May.
    10. Amin Sokhanvar & Chien-Chiang Lee, 2023. "How do energy price hikes affect exchange rates during the war in Ukraine?," Empirical Economics, Springer, vol. 64(5), pages 2151-2164, May.

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