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Unveiling the Time-dependent Dynamics between Oil Prices and Exchange Rates: A Wavelet-based Panel Analysis

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  • Hyunjoo Kim Karlsson
  • Kristofer Mnsson
  • Pr Sjlander

Abstract

The objective of this paper is to re-examine the relationship between real oil prices and real effective exchange rates (REER) for major oil-exporting countries with floating exchange rates. We apply the wavelet-based principles of Gallegati et al. (2016) using monthly data for the period 1996 to 2015. In contrast to many previous studies, our results support the theoretically expected positive nexus between the real oil prices and REER for our dataset. This (theoretically-expected) positive relationship is stronger at the larger time scales (that is, at the 4-8 and 8-16 month wavelet scales) compared to the smaller time scales (that is, at the 1-2 and 2-4 month wavelet scales). The findings of this study therefore add to the existing literature, since they disentangle the specific relationship between oil prices and exchange rates at different time scales, which has important policy implications.

Suggested Citation

  • Hyunjoo Kim Karlsson & Kristofer Mnsson & Pr Sjlander, 2020. "Unveiling the Time-dependent Dynamics between Oil Prices and Exchange Rates: A Wavelet-based Panel Analysis," The Energy Journal, , vol. 41(6), pages 87-106, November.
    • Handle: RePEc:sae:enejou:v:41:y:2020:i:6:p:87-106
    DOI: 10.5547/01956574.41.6.hkar
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    References listed on IDEAS

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    Cited by:

    1. Oguzhan Cepni, Duc Khuong Nguyen, and Ahmet Sensoy, 2022. "News Media and Attention Spillover across Energy Markets: A Powerful Predictor of Crude Oil Futures Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).

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    More about this item

    Keywords

    Oil prices; Commodity prices; Exchange rates; Time scales; Wavelet analysis;
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    JEL classification:

    • F0 - International Economics - - General

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