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Oil Prices, Exchange Rates and Emerging Stock Markets

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  • Syed Abul Basher

    ()
    (Department of Research & Monetary Policy Qatar Central Bank)

  • Alfred Haug

    ()
    (Department of Economics, University of Otago)

  • Perry Sadorsky

    ()
    (Schulich School of Business, York University)

Abstract

While two different streams of literature exist investigating 1) the relationship between oil prices and emerging market stock prices and 2) oil prices and exchange rates, relatively little is known about the relationship between oil prices, exchange rates and emerging stock markets. This paper proposes and estimates a structural vector autoregression to investigate the dynamic relationship between these variables. Impulse responses are calculated in two ways (standard, projection based methods). The model supports stylized facts. In particular, positive shocks to oil prices tend to depress emerging market stock prices and US dollar exchange rates in the short run.

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File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_1014.pdf
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Bibliographic Info

Paper provided by University of Otago, Department of Economics in its series Working Papers with number 1014.

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Length: 36 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
Handle: RePEc:otg:wpaper:1014

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Keywords: Emerging markets; oil prices; exchange rates;

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Cited by:
  1. Joscha Beckmann & Robert Czudaj, 2013. "Is there a Homogeneous Causality Pattern between Oil Prices and Currencies of Oil Importers and Exporters?," Ruhr Economic Papers 0431, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. M. Ibrahim Turhan & Erk Hacihasanoglu & Ugur Soytas, 2012. "Oil Prices and Emerging Market Exchange Rates," Working Papers 1201, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  3. Buetzer, Sascha & Habib, Maurizio Michael & Stracca, Livio, 2012. "Global exchange rate configurations: Do oil shocks matter?," Working Paper Series 1442, European Central Bank.
  4. 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.
  5. Ronayne, David, 2011. "Which Impulse Response Function?," The Warwick Economics Research Paper Series (TWERPS) 971, University of Warwick, Department of Economics.
  6. Bülent Alta & Mert Topcu & Ebru Erdoðan, 2013. "Nevsehir University, Department of Economics, Nevsehir, Turkey," International Journal of Energy Economics and Policy, Econjournals, vol. 3(Special), pages 7 - 13.
  7. Śmiech, Sławomir & Papież, Monika, 2013. "Fossil fuel prices, exchange rate, and stock market: A dynamic causality analysis on the European market," Economics Letters, Elsevier, vol. 118(1), pages 199-202.
  8. Chen, Wang & Hamori, Shigeyuki & Kinkyo, Takuji, 2014. "Macroeconomic impacts of oil prices and underlying financial shocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 1-12.
  9. Mohammad Joarder & Monir Ahmed & Tahsina Haque & Syed Hasanuzzaman, 2014. "An empirical testing of informational efficiency in Bangladesh capital market," Economic Change and Restructuring, Springer, vol. 47(1), pages 63-87, February.
  10. Reboredo, Juan Carlos & Rivera-Castro, Miguel A. & Zebende, Gilney F., 2014. "Oil and US dollar exchange rate dependence: A detrended cross-correlation approach," Energy Economics, Elsevier, vol. 42(C), pages 132-139.
  11. Chen, Wei-Peng & Choudhry, Taufiq & Wu, Chih-Chiang, 2013. "The extreme value in crude oil and US dollar markets," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 191-210.
  12. Krenar Avdulaj & Jozef Barunik, 2013. "Are benefits from oil - stocks diversification gone? A new evidence from a dynamic copulas and high frequency data," Papers 1307.5981, arXiv.org.
  13. repec:wyi:wpaper:002210 is not listed on IDEAS
  14. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2013. "Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1220-1239.
  15. Shahbaz, Muhammad & Tiwari, Aviral Kumar & Tahir, Mohammad Iqbal, 2013. "Analyzing Time-Frequency Relationship between Oil Price and Exchange Rate in Pakistan through Wavelets," MPRA Paper 48086, University Library of Munich, Germany, revised 05 Jul 2013.
  16. Syed Abul, Basher, 2014. "Stock markets and energy prices," MPRA Paper 53863, University Library of Munich, Germany.
  17. Natanelov, Valeri & McKenzie, Andrew M. & Van Huylenbroeck, Guido, 2013. "Crude oil–corn–ethanol – nexus: A contextual approach," Energy Policy, Elsevier, vol. 63(C), pages 504-513.
  18. Lóránd István KRÁLIK, 2012. "Macroeconomic Variables and Stock Market Evolution," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 60(2), pages 197-203, May.
  19. Lin, Boqiang & Wesseh, Presley K. & Appiah, Michael Owusu, 2014. "Oil price fluctuation, volatility spillover and the Ghanaian equity market: Implication for portfolio management and hedging effectiveness," Energy Economics, Elsevier, vol. 42(C), pages 172-182.
  20. Stavros Degiannakis & George Filis & Renatas Kizys, 2013. "Oil price shocks and stock market volatility: evidence from European data," Working Papers 161, Bank of Greece.

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