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Another look at the interaction between oil price uncertainty and exchange rate volatility: The case of small open economies

Author

Listed:
  • Fethi Ayachi
  • Jamal Bouoiyour

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

  • Refk Selmi

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

Several studies considered oil price as exchange rate determinants. The novelty of our paper is to test if the lagged oil price are statistically significant predictors of Moroccan and Tunisian exchange rate. We consider a stricter GARCH specifications (linear versus nonlinear, symmetric versus asymmetric, power versus level shift) to verify whether lagged rather contemporaneous oil price have a predictive content for future exchange rates. Our results show that the effects of shoks to oil price can immediately translate in changes in exchange rates and are short-lived in Morocco and long-lived in Tunisia. This linkage reacts more to good news than bad news in Morocco and conversly for Tunisian case. Additionally, establish an unstable interaction between the considered variables across all estimates with preponderence of the effect of switching regime effect (threashold and level shift).
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Suggested Citation

  • Fethi Ayachi & Jamal Bouoiyour & Refk Selmi, 2012. "Another look at the interaction between oil price uncertainty and exchange rate volatility: The case of small open economies," Post-Print hal-01879693, HAL.
    • Handle: RePEc:hal:journl:hal-01879693
    DOI: 10.1016/S2212-5671(12)00040-8
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    Cited by:

    1. Bouoiyour, Jamal & Selmi, Refk, 2013. "The controversial link between exchange rate volatility and exports: Evidence from Tunisian case," MPRA Paper 49133, University Library of Munich, Germany, revised Mar 2013.
    2. Kassouri, Yacouba & Altıntaş, Halil, 2022. "The quantile dependence of the stock returns of “clean” and “dirty” firms on oil demand and supply shocks," Journal of Commodity Markets, Elsevier, vol. 28(C).
    3. Bouoiyour, Jamal & Selmi, Refk & Tiwari, Aviral Kumar & Shahbaz, Muhammad, 2015. "The nexus between oil price and Russia's real exchange rate: Better paths via unconditional vs conditional analysis," Energy Economics, Elsevier, vol. 51(C), pages 54-66.
    4. Zankawah, Mutawakil M. & Stewart, Chris, 2019. "Measuring volatility spill-over effects of crude oil prices on Ghana’s exchange rate and stock market between 1991 and 2015," Economics Discussion Papers 2019-1, School of Economics, Kingston University London.
    5. 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.
    6. Zied Ftiti & Aviral Tiwari & Ibrahim Fatnassi, 2014. "Oil price and macroeconomy in India – An evolutionary cospectral coherence approach," Working Papers 2014-68, Department of Research, Ipag Business School.
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    8. Bouoiyour, Jamal & Selmi, Refk & Tiwari, Aviral Kumar & Shahbaz, Muhammad, 2015. "The nexus between oil price and Russia's real exchange rate: Better paths via unconditional vs conditional analysis," Energy Economics, Elsevier, vol. 51(C), pages 54-66.

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    More about this item

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • F0 - International Economics - - General
    • F00 - International Economics - - General - - - General

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