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The connectedness between uncertainty and exchange rates of oil import countries: new evidence from time and frequency perspective

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Listed:
  • Mo, Bin
  • Zeng, Haiyu
  • Meng, Juan
  • Ding, Shaokai

Abstract

In this study, we have empirically investigated the dynamic spillovers in the connectedness of global economic policy uncertainty and oil market volatility concerning exchange rates in crude oil-importing countries. Our findings reveal that global economic policy uncertainty consistently acts as a net recipient of spillovers, both in the short and long runs. Contrastingly, in the short term, oil market volatility emerges as a significant net transmitter of risk spillovers, with oil price fluctuations exerting a predominant influence on exchange rate volatility in nations reliant on crude oil imports. Remarkably, this relationship undergoes a notable reversal in the long run. In the long run, geopolitical uncertainty takes precedence, establishing itself as the primary net spillover factor, superseding the influence previously exerted by oil price volatility. These empirical insights offer valuable guidance for policymakers in effectively managing external shocks in the context of global economic uncertainties and oil market dynamics.

Suggested Citation

  • Mo, Bin & Zeng, Haiyu & Meng, Juan & Ding, Shaokai, 2024. "The connectedness between uncertainty and exchange rates of oil import countries: new evidence from time and frequency perspective," Resources Policy, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:jrpoli:v:88:y:2024:i:c:s0301420723011091
    DOI: 10.1016/j.resourpol.2023.104398
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    More about this item

    Keywords

    Time and frequency connectedness; Uncertainty; Crude oil; Exchange rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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