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Asymmetrical long-run dependence between oil price and US dollar exchange rate—Based on structural oil shocks

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  • Jiang, Jiaqi
  • Gu, Rongbao

Abstract

The multifractal behavior in cross-correlation between oil prices and exchange rates is examined in this paper. We use the multifractal detrended cross-correlation analysis to investigate the general cross-correlations, and further show that these cross-correlations are asymmetric by multifractal asymmetric cross-correlation analysis. We recover the structural oil shocks and then use these indicators to characterize the asymmetries along with oil price trend itself. Our empirical results show that their asymmetric degrees vary significantly. The sign of oil supply shock leads to the most significant asymmetry among them.

Suggested Citation

  • Jiang, Jiaqi & Gu, Rongbao, 2016. "Asymmetrical long-run dependence between oil price and US dollar exchange rate—Based on structural oil shocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 456(C), pages 75-89.
    • Handle: RePEc:eee:phsmap:v:456:y:2016:i:c:p:75-89
    DOI: 10.1016/j.physa.2016.03.016
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