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On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis

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  • Fredj Jawadi
  • Waël Louhichi
  • Hachmi Ben Ameur
  • Abdoulkarim Idi Cheffou

Abstract

The paper investigates the dynamics of oil price volatility by examining interactions between the oil market and the US USD/EUR exchange rate. To this end, we use recent intradaily data to measure realised volatility and to investigate the instantaneous intradaily linkages between different types and proxies of oil price and US$/euro volatilities. We specify the drivers of oil price volatility through a focus on extreme US$ exchange rate movements (intradaily jumps). Accordingly, we find a negative relationship between the US USD/EUR and oil returns, indicating that a US $ appreciation decreases oil price. Second, we note the presence of a volatility spillover from the US exchange market to the oil market. Interestingly, this spillover effect seems to occur through intradaily jumps in both markets.

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  • Fredj Jawadi & Waël Louhichi & Hachmi Ben Ameur & Abdoulkarim Idi Cheffou, 2017. "On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis," EconomiX Working Papers 2017-11, University of Paris Nanterre, EconomiX.
  • Handle: RePEc:drm:wpaper:2017-11
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    Cited by:

    1. Citak, Yusuf Ensar & Masih, Mansur, 2017. "Discerning Granger-causal chain between oil prices, exchange rates and inflation rates: Evidence from Turkey," MPRA Paper 79453, University Library of Munich, Germany.
    2. Chul-Yong Lee & Sung-Yoon Huh, 2017. "Forecasting Long-Term Crude Oil Prices Using a Bayesian Model with Informative Priors," Sustainability, MDPI, Open Access Journal, vol. 9(2), pages 1-15, January.

    More about this item

    Keywords

    Oil price volatility; realised volatility; intradaily jumps; exchange rate; intradaily data; GARCH model.;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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