Time and frequency connectedness among oil prices, uncertainty indicators, and exchange rates: Additional evidence from expanded BRICS countries

This study examines the connectedness among oil commodity prices (OP), the two important representative measures of uncertainty, economic policy uncertainty (EP) and geopolitical risk (GP), their interaction (EPG), and the exchange rate returns of oil-exporting and oil-importing expanded BRICS economies. Using data from January 1997 to June 2023, we adopt the time- and frequency-based connectedness approach to investigate whether the interrelationships inherent in the network of variables exhibit dynamics across time and frequency domains. The results reveal that the average total connectedness index is relatively higher for oil-importing economies compared to oil-exporting countries, while the observed connectedness is predominantly long-term for oil-importing countries, contrasting with the more short-term-driven connectedness for oil-exporting economies. Peak events observed during critical global events such as the early 2000s bubble burst, the Global Financial Crisis, and the COVID-19 pandemic are noted for both oil-exporting and oil-importing countries. It is further observed for the oil exporters that OP is a net recipient of shocks from EP and EPG, while it transmits shock spillovers to Ruble, Rial, Real, and Dirham. EP and GP indexes act as both net transmitters and recipients, primarily driven by long-term dynamics. Additionally, the exchange rates of the Dirham exhibit heterogeneous tendencies, functioning as a net transmitter in the short term and a net receiver in the long term across the sample. For oil-importing countries, the Renminbi and Peso consistently emerge as net receivers of spillovers. OP is primarily a net receiver, while EP, GP, and EPG are net transmitters. Our results have implications for investors and policymakers.