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Copula-Based Modelling of Relationship Between Dollar/Rouble Exchange Rate and Oil Prices

Author

Listed:
  • Andrey Bedin

    (RANEPA; MIPT)

  • Alexander Kulikov

    (RANEPA; MIPT)

  • Andrey Polbin

    (Gaidar Institute for Economic Policy; RANEPA)

Abstract

Oil prices are an important factor defining the dynamics of the rouble exchange rate. In this paper, we use the copula approach to describe the impact of oil prices on the rouble exchange rate in 2016–2021 on weekly and monthly data. To model one-dimensional distributions of log oil price growth and log US dollar/rouble exchange rate growth, we compare approaches using empirical distributions and calibrated parametric distributions. We show that, even though the best copula for both weekly and monthly data is the Student copula, the response of the exchange rate to oil price changes is asymmetrical due to the higher skewness of the distribution of log exchange rate growth. The copulas considered in this paper are tested for goodness-of-fit. We also test the model on 2022 data.

Suggested Citation

  • Andrey Bedin & Alexander Kulikov & Andrey Polbin, 2023. "Copula-Based Modelling of Relationship Between Dollar/Rouble Exchange Rate and Oil Prices," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 87-109, September.
    • Handle: RePEc:bkr:journl:v:82:y:2023:i:3:p:87-109
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    References listed on IDEAS

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    More about this item

    Keywords

    copula; rouble exchange rate; oil price; nonlinear econometric models;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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