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On the relationship between oil price and exchange rates: A wavelet analysis

Author

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  • Uddin, Gazi Salah
  • Tiwari, Aviral Kumar
  • Arouri, Mohamed
  • Teulon, Frédéric

Abstract

We may find numerous works in the existing literature regarding the cohesion between oil prices and exchange rates, yet an exact shape of the relationship remains undefined. By restoring to wavelet analysis and using a rich database from Japan, this study contributes to the literature by investigating the said relationship within the time–frequency space. Over the time horizon, it is being established that the strength of the relationship between oil price and exchange rate keeps changing. If the Bank of Japan needs to control the exchange rate, it should give proper importance to shocks on oil prices, while formulating exchange rate policy.

Suggested Citation

  • Uddin, Gazi Salah & Tiwari, Aviral Kumar & Arouri, Mohamed & Teulon, Frédéric, 2013. "On the relationship between oil price and exchange rates: A wavelet analysis," Economic Modelling, Elsevier, vol. 35(C), pages 502-507.
  • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:502-507
    DOI: 10.1016/j.econmod.2013.07.035
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    References listed on IDEAS

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    More about this item

    Keywords

    Oil price; Exchange rates; Wavelets; Japan;

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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