IDEAS home Printed from https://ideas.repec.org/a/uii/journl/v13y2021i2p200-215id19698.html
   My bibliography  Save this article

Exchange rates and oil price under uncertainty and regime switching: A Markov-switching VAR approach

Author

Listed:
  • Nagmi Moftah Aimer
  • Abdulmula Albashir Lusta

Abstract

Purpose - This paper analyses the effects of the US economic policy uncertainty index and oil price changes on the dollar exchange rate over a monthly period from January 2006 to August 2020.Methods - This paper uses the Markov-switching Vector Auto-Regressive (VAR) model.Findings - The results show that the sharp decline regime in the exchange rate is the most stable. In addition, the impact of the oil price on the exchange rate of the concerned currencies is stronger than the effect of EPU on the exchange rate of these currencies. We also find that most of the effects of oil prices were negative, while positive for the Canadian dollar and the Japanese yen exchange rate.Implications - Addressing this investigation contributes to many of the areas covered in recent macroeconomic and finance research. Moreover, such research can help predict changes in currency and oil prices better and create profitable investment and hedging strategies for currencies and oil.Originality - We consider the effect of economic policy uncertainty (EPU) and oil price changes on the relationships between those markets and study these relationships under different market conditions.

Suggested Citation

  • Nagmi Moftah Aimer & Abdulmula Albashir Lusta, 2021. "Exchange rates and oil price under uncertainty and regime switching: A Markov-switching VAR approach," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 13(2), pages 200-215.
    • Handle: RePEc:uii:journl:v:13:y:2021:i:2:p:200-215:id:19698
    as

    Download full text from publisher

    File URL: https://journal.uii.ac.id/JEP/article/view/19698/11684
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uii:journl:v:13:y:2021:i:2:p:200-215:id:19698. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Yuliani (email available below). General contact details of provider: https://journal.uii.ac.id/JEP/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.