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Asymmetric Effects of Exchange Rates on Energy Demand in E7 Countries: New Evidence from Multiple Thresholds Nonlinear ARDL Model

Author

Listed:
  • Xiaohui GONG

    (School of Mathematics and Statistics, Ludong University, Yantai, China;)

  • Bisharat Hussain CHANG

    (Department of Business Administration, Sukkur IBA University, Sukkur, Sindh, Pakistan)

  • Xi CHEN

    (Finance and Investment, Guangdong University of Finance, Guangzhou, China;)

  • Kaiyang ZHONG

    (School of Economic Information Engineering, Southwestern University of Finance and Economics, Chengdu, China;)

Abstract

This study investigates the impact of very small to very large changes in the exchange rate on energy demand in the emerging 7 (E7) countries - Brazil, China, India, Indonesia, Mexico, Russia, and Turkey, which has not been thoroughly explored in the literature. We use the multiple thresholds nonlinear ARDL (MTNARDL) approach and compare its results with conventional ARDL and nonlinear autoregressive distributed lag (NARDL) methods. Moreover, we use Granger causality in the quantile test for robustness purposes. Our findings reveal that the MTNARDL approach with decile series shows a long-run association between energy demand and the exchange rate for all E7 countries. In contrast, the conventional ARDL and NARDL approach only finds a long-run association for India. Finally, our results based on the Granger causality in quantile test suggest that the effect varies across various quantiles. The study provides valuable policy recommendations based on the results, emphasizing the importance of considering the impact of extreme exchange rate variations when formulating energy demand policies in E7 countries.

Suggested Citation

  • Xiaohui GONG & Bisharat Hussain CHANG & Xi CHEN & Kaiyang ZHONG, 2023. "Asymmetric Effects of Exchange Rates on Energy Demand in E7 Countries: New Evidence from Multiple Thresholds Nonlinear ARDL Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 125-142, June.
    • Handle: RePEc:rjr:romjef:v::y:2023:i:2:p:125-142
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    References listed on IDEAS

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    More about this item

    Keywords

    Energy demand; E7 countries; exchange rate; multiple thresholds nonlinear ARDL model; MTNARDL model.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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