IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v49y2013is1p21-36.html
   My bibliography  Save this article

Oil Prices and Emerging Market Exchange Rates

Author

Listed:
  • Ibrahim Turhan
  • Erk Hacihasanoglu
  • Ugur Soytas

Abstract

This paper investigates the role of oil prices in explaining the dynamics of selected emerging countries' exchange rates. Using daily data series, the study concludes that a rise in oil prices leads to significant appreciation of emerging economies' currencies against the U.S. dollar. The authors divide daily returns from January 3, 2003, to June 2, 2010, into three subsamples and test the impact of changes in oil prices on exchange rate movements, generalizing impulse response functions to track the dynamic response of each exchange rate in three different time periods. Their findings suggest that oil price dynamics changed significantly in the sample period and the relationship between oil prices and exchange rates became more obvious after the 2008 financial crisis.

Suggested Citation

  • Ibrahim Turhan & Erk Hacihasanoglu & Ugur Soytas, 2013. "Oil Prices and Emerging Market Exchange Rates," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S1), pages 21-36, January.
  • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s1:p:21-36
    as

    Download full text from publisher

    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=933817651K933577
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2012. "Oil prices, exchange rates and emerging stock markets," Energy Economics, Elsevier, vol. 34(1), pages 227-240.
    2. Golub, Stephen S, 1983. "Oil Prices and Exchange Rates," Economic Journal, Royal Economic Society, vol. 93(371), pages 576-593, September.
    3. Khan, Salman, 2010. "Crude Oil Price shocks to Emerging Markets: Evaluating the BRICs Case," MPRA Paper 22978, University Library of Munich, Germany.
    4. Amano, R. A. & van Norden, S., 1998. "Oil prices and the rise and fall of the US real exchange rate," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 299-316, April.
    5. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    6. Paul R. Krugman, 1980. "Oil and the Dollar," NBER Working Papers 0554, National Bureau of Economic Research, Inc.
    7. Rabah Arezki & Fuad Hasanov, 2013. "Global Imbalances and Petrodollars," The World Economy, Wiley Blackwell, vol. 36(2), pages 213-232, February.
    8. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    9. Lizardo, Radhamés A. & Mollick, André V., 2010. "Oil price fluctuations and U.S. dollar exchange rates," Energy Economics, Elsevier, vol. 32(2), pages 399-408, March.
    10. Chaudhuri, Kausik & Daniel, Betty C., 1998. "Long-run equilibrium real exchange rates and oil prices," Economics Letters, Elsevier, vol. 58(2), pages 231-238, February.
    11. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    12. Narayan, Paresh Kumar & Narayan, Seema & Prasad, Arti, 2008. "Understanding the oil price-exchange rate nexus for the Fiji islands," Energy Economics, Elsevier, vol. 30(5), pages 2686-2696, September.
    13. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    14. Chen, Shiu-Sheng & Chen, Hung-Chyn, 2007. "Oil prices and real exchange rates," Energy Economics, Elsevier, vol. 29(3), pages 390-404, May.
    15. Miller, J. Isaac & Ratti, Ronald A., 2009. "Crude oil and stock markets: Stability, instability, and bubbles," Energy Economics, Elsevier, vol. 31(4), pages 559-568, July.
    16. Mr. Johannes Wiegand, 2008. "Bank Recycling of Petro Dollars to Emerging Market Economies During the Current Oil Price Boom," IMF Working Papers 2008/180, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beckmann, Joscha & Czudaj, Robert, 2013. "Is there a homogeneous causality pattern between oil prices and currencies of oil importers and exporters?," Energy Economics, Elsevier, vol. 40(C), pages 665-678.
    2. Khalid M. Kisswani & Mahelet G. Fikru, 2023. "A Review of Econometric Approaches for the Oil Price-Exchange Rate Nexus: Lessons for ASEAN-5 Countries," Energies, MDPI, vol. 16(9), pages 1-15, April.
    3. Kumeka, Terver Theophilus & Uzoma-Nwosu, Damian Chidozie & David-Wayas, Maria Onyinye, 2022. "The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies," Resources Policy, Elsevier, vol. 77(C).
    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. Prasad Bal, Debi & Narayan Rath, Badri, 2015. "Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India," Energy Economics, Elsevier, vol. 51(C), pages 149-156.
    6. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2012. "Oil prices, exchange rates and emerging stock markets," Energy Economics, Elsevier, vol. 34(1), pages 227-240.
    7. Jozef Baruník & Evžen KoÄ enda, 2019. "Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets," The Energy Journal, , vol. 40(2_suppl), pages 157-174, December.
    8. Beckmann, Joscha & Czudaj, Robert, 2013. "Oil prices and effective dollar exchange rates," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 621-636.
    9. Pershin, Vitaly & Molero, Juan Carlos & de Gracia, Fernando Perez, 2016. "Exploring the oil prices and exchange rates nexus in some African economies," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 166-180.
    10. Tiwari, Aviral Kumar & Albulescu, Claudiu Tiberiu, 2016. "Oil price and exchange rate in India: Fresh evidence from continuous wavelet approach and asymmetric, multi-horizon Granger-causality tests," Applied Energy, Elsevier, vol. 179(C), pages 272-283.
    11. repec:zbw:rwirep:0431 is not listed on IDEAS
    12. 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).
    13. Chatziantoniou, Ioannis & Elsayed, Ahmed H. & Gabauer, David & Gozgor, Giray, 2023. "Oil price shocks and exchange rate dynamics: Evidence from decomposed and partial connectedness measures for oil importing and exporting economies," Energy Economics, Elsevier, vol. 120(C).
    14. Apostolakis, George N. & Floros, Christos & Gkillas, Konstantinos & Wohar, Mark, 2021. "Financial stress, economic policy uncertainty, and oil price uncertainty," Energy Economics, Elsevier, vol. 104(C).
    15. Bing‐Yue Liu & Qiang Ji & Duc Khuong Nguyen & Ying Fan, 2021. "Dynamic dependence and extreme risk comovement: The case of oil prices and exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2612-2636, April.
    16. Youssef, Manel & Mokni, Khaled, 2020. "Modeling the relationship between oil and USD exchange rates: Evidence from a regime-switching-quantile regression approach," Journal of Multinational Financial Management, Elsevier, vol. 55(C).
    17. 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.
    18. Chen, Hongtao & Liu, Li & Wang, Yudong & Zhu, Yingming, 2016. "Oil price shocks and U.S. dollar exchange rates," Energy, Elsevier, vol. 112(C), pages 1036-1048.
    19. Beckmann, Joscha & Czudaj, Robert L. & Arora, Vipin, 2020. "The relationship between oil prices and exchange rates: Revisiting theory and evidence," Energy Economics, Elsevier, vol. 88(C).
    20. Kyritsis, Evangelos & Serletis, Apostolos, 2018. "The zero lower bound and market spillovers: Evidence from the G7 and Norway," Research in International Business and Finance, Elsevier, vol. 44(C), pages 100-123.
    21. Yang Liu & Tongshuai Qiao & Liyan Han, 2022. "Does clean energy matter? Revisiting the spillovers between energy and foreign exchange markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(11), pages 2068-2083, November.

    More about this item

    Keywords

    emerging market exchange rates; financial crisis; oil prices;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G01 - Financial Economics - - General - - - Financial Crises
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:49:y:2013:i:s1:p:21-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.