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Jump spillover between oil prices and exchange rates

Author

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  • Li, Xiao-Ping
  • Zhou, Chun-Yang
  • Wu, Chong-Feng

Abstract

In this paper, we investigate the jump spillover effects between oil prices and exchange rates. To identify the latent historical jumps for exchange rates and oil prices, we use a Bayesian MCMC approach to estimate the stochastic volatility model with correlated jumps in both returns and volatilities for each. We examine the simultaneous jump intensities and the conditional jump spillover probabilities between oil prices and exchange rates, finding strong evidence of jump spillover effects. Further analysis shows that the jump spillovers are mainly due to exogenous events such as financial crises and geopolitical events. Thus, the findings have important implications for financial risk management.

Suggested Citation

  • Li, Xiao-Ping & Zhou, Chun-Yang & Wu, Chong-Feng, 2017. "Jump spillover between oil prices and exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 486(C), pages 656-667.
  • Handle: RePEc:eee:phsmap:v:486:y:2017:i:c:p:656-667
    DOI: 10.1016/j.physa.2017.05.045
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:eneeco:v:76:y:2018:i:c:p:574-583 is not listed on IDEAS
    2. repec:eee:phsmap:v:516:y:2019:i:c:p:254-266 is not listed on IDEAS
    3. repec:eee:phsmap:v:508:y:2018:i:c:p:434-453 is not listed on IDEAS
    4. repec:eee:jrpoli:v:63:y:2019:i:c:36 is not listed on IDEAS

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