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Global economic activity, crude oil price and production, stock market behaviour and the Nigeria-US exchange rate

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  • Olayeni, Olaolu Richard
  • Tiwari, Aviral Kumar
  • Wohar, Mark E.

Abstract

This paper investigates the dynamic relationship among oil price, Nigeria-US exchange rate, stock market activity, Kilian's global economic activity index, and global oil production. We develop a robust, stable single-equation error correction model where the exchange rate solely bears the burden of short-run adjustments with causal influences from the rest of the variables included in the model. We find a role for asymmetry in the long run, confirming the presence of equilibrium-path adjustment asymmetry and suggesting that the positive and negative variations must be accounted for in designing the policymaking process to enforce stable exchange rate movement. By comparing the linear and nonlinear models, we find that the two models are complementary and that each is horizon-bound in its forecasting ability.

Suggested Citation

  • Olayeni, Olaolu Richard & Tiwari, Aviral Kumar & Wohar, Mark E., 2020. "Global economic activity, crude oil price and production, stock market behaviour and the Nigeria-US exchange rate," Energy Economics, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:eneeco:v:92:y:2020:i:c:s0140988320302784
    DOI: 10.1016/j.eneco.2020.104938
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    3. Sarit Maitra, 2023. "Impact of Economic Uncertainty, Geopolitical Risk, Pandemic, Financial & Macroeconomic Factors on Crude Oil Returns -- An Empirical Investigation," Papers 2310.01123, arXiv.org, revised Oct 2023.
    4. Xu, Xin & Huang, Shupei & An, Haizhong, 2022. "The dynamic moderating function of the exchange rate market on the oil-stock nexus," International Review of Financial Analysis, Elsevier, vol. 81(C).
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    6. Shaobo Long & Mengxue Zhang & Keaobo Li & Shuyu Wu, 2021. "Do the RMB exchange rate and global commodity prices have asymmetric or symmetric effects on China’s stock prices?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-21, December.
    7. Liu, Donghui & Meng, Lingjie & Wang, Yudong, 2021. "The asymmetric effects of oil price changes on China’s exports: New evidence from a nonlinear autoregressive distributed lag model," Journal of Asian Economics, Elsevier, vol. 77(C).
    8. Chowdhury, Emon, 2023. "The Impact of Commodity Market on the Economy of Developing Countries," MPRA Paper 119462, University Library of Munich, Germany, revised 05 Dec 2023.
    9. Guo, Jiaqi & Long, Shaobo & Luo, Weijie, 2022. "Nonlinear effects of climate policy uncertainty and financial speculation on the global prices of oil and gas," International Review of Financial Analysis, Elsevier, vol. 83(C).
    10. Sarit Maitra & Vivek Mishra & Sukanya Kundu & Manav Chopra, 2023. "Econometric Model Using Arbitrage Pricing Theory and Quantile Regression to Estimate the Risk Factors Driving Crude Oil Returns," Papers 2309.13096, arXiv.org, revised Oct 2023.
    11. Chaturvedi, Priya & Kumar, Kuldeep, 2022. "Econometric modelling of exchange rate volatility using mixed-frequency data," MPRA Paper 115222, University Library of Munich, Germany.

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