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Time Varying And Asymmetric Effect Between Oil Prices And Nominal Exchange Rate Volatility: A Multivariate Fiegarch-Dcc Approach

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  • RIADH EL ABED

Abstract

This study examines the interdependence of four exchange rate expressed in dollar namely (AUD/USD, CAD/USD, EUR/USD and MXN/USD) and crude oil (WTI).The aim of this paper is to examine how the dynamics of correlations between the major exchange rate and oil price evolved from January 01, 2004 to May31, 2015.To this end, we adopt a dynamic conditional correlation (DCC) model into a multivariate Fractionally Integrated Exponential GARCH (FIEGARCH) framework, which accounts for long memory, leverage terms and time varying correlations. The empirical findings indicate the evidence of time-varying co-movement, a high persistence of the conditional correlation and the dynamic correlations revolve around a constant level and the dynamic process appears to be meaning reverting.

Suggested Citation

  • Riadh El Abed, 2017. "Time Varying And Asymmetric Effect Between Oil Prices And Nominal Exchange Rate Volatility: A Multivariate Fiegarch-Dcc Approach," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 9(1 (March)), pages 86-106.
    • Handle: RePEc:shc:jaresh:v:9:y:2017:i:1:p:86-106
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    Keywords

    DCC-FIEGARCH; Asymmetries; Long memory; nominal exchange rate and Crude oil.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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