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The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework

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  • Tiwari, Aviral Kumar
  • Mutascu, Mihai Ioan
  • Albulescu, Claudiu Tiberiu

Abstract

The purpose of this paper is to assess the empirical influence of oil prices on the real effective exchange rate in Romania in a wavelet transform framework. More precisely, we investigate to what extent oil prices impact the real effective exchange rate in an Eastern European transition country, characterised by a low level of retail fuel prices and by an important growth rate of these prices as compared to the other EU countries. For this purpose we use a discrete wavelet transform approach and scale-by-scale Granger causality tests. We find that oil prices have a strong influence on the real effective exchange rate in the short run, but also for large time horizons. These results are important considering the fact that, in a classical Granger causality linear framework for the entire sample, we find that oil prices have no influence on the real effective exchange rate. The findings remain robust when resampling the initial 1986–2009 period, or when we use an alternative continuous wavelet transform. In addition, we discover that mainly the positive shocks associated with an increase in oil prices have an impact upon the real effective exchange rate movements in the short and long runs.

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  • 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.
  • Handle: RePEc:eee:eneeco:v:40:y:2013:i:c:p:714-733 DOI: 10.1016/j.eneco.2013.08.016
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    Cited by:

    1. Luís Aguiar-Conraria & Maria Joana Soares & Rita Sousa, 2017. "California´s Carbon Market and Energy Prices: A Wavelet Analysis," NIPE Working Papers 13/2017, NIPE - Universidade do Minho.
    2. Wen-Yi CHEN & Yu-Hui LIN, 2016. "Co-Movement of Healthcare Financing in OECD Countries: Evidence from Discrete Wavelet Analyses," Journal for Economic Forecasting, Institute for Economic Forecasting, pages 40-56.
    3. repec:eee:reveco:v:49:y:2017:i:c:p:536-547 is not listed on IDEAS
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    6. Rita Sousa & Luís Francisco Aguiar-Conraria & Maria Joana Soares, "undated". "Carbon and Energy Prices: Surfing the Wavelets of California," NIPE Working Papers 19/2014, NIPE - Universidade do Minho.
    7. Nuray Terzi & Sadullah Celik, 2016. "Oil Prices And Trade In Turkey: A Wavelet Continuous Transform Analysis," Eurasian Journal of Economics and Finance, Eurasian Publications, pages 29-41.
    8. Rita Sousa & Luís Aguiar-Conraria & Maria Joana Soares, 2014. "Carbon Financial Markets: a time-frequency analysis of CO2 price drivers," NIPE Working Papers 03/2014, NIPE - Universidade do Minho.
    9. 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.
    10. Funashima, Yoshito, 2016. "Governmentally amplified output volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 469-478.
    11. repec:ipg:wpaper:2014-068 is not listed on IDEAS
    12. 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, pages 272-283.
    13. repec:spr:empeco:v:52:y:2017:i:4:d:10.1007_s00181-016-1113-5 is not listed on IDEAS
    14. Claudiu Tiberiu Albulescu & Daniel Goyeau & Aviral Kumar Tiwari, 2017. "Co-movements and contagion between international stock index futures markets," Empirical Economics, Springer, pages 1529-1568.
    15. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Wen, Shaobo & Hao, Xiaoqing, 2017. "The multiscale impact of exchange rates on the oil-stock nexus: Evidence from China and Russia," Applied Energy, Elsevier, pages 667-678.
    16. Sousa, Rita & Aguiar-Conraria, Luís & Soares, Maria Joana, 2014. "Carbon financial markets: A time–frequency analysis of CO2 prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 414(C), pages 118-127.

    More about this item

    Keywords

    Oil prices; Exchange rate nexus; Wavelet cross-correlation; Granger causality; Romania;

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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