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Investigating the oil price-exchange rate nexus: Evidence from Africa

Author

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  • Simeon Coleman

    (Division of Economics, Nottingham Business School, Nottingham Trent University)

  • Juan Carlos Cuestas

    (Department of Economics, The University of Sheffield)

  • Estefanía Mourelle

    (Facultad de Ciencias Económicas y Empresariales, Universidade da Coruña)

Abstract

In this paper, we aim to provide further insights into the importance of real oil price as a determinant of real exchange rates for a pool of African countries. While this relationship has been explored substantially for many industrialised economies, African countries have received little attention. By means of cointegration techniques and nonlinear dynamics we find that, for some of these countries, shocks in the real price of oil are particularly important in determining the real exchange rates, even in the long run. These results would be of interest for policymakers in order to deal more effectively with exchange rate policy decisions, aiming at promoting economic growth in the area.

Suggested Citation

  • Simeon Coleman & Juan Carlos Cuestas & Estefanía Mourelle, 2011. "Investigating the oil price-exchange rate nexus: Evidence from Africa," Working Papers 2011015, The University of Sheffield, Department of Economics, revised May 2011.
    • Handle: RePEc:shf:wpaper:2011015
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    Cited by:

    1. Pershin, Vitaly & Molero, Juan Carlos & de Gracia, Fernando Perez, 2016. "Exploring the oil prices and exchange rates nexus in some African economies," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 166-180.
    2. Mehmet Balcilar & Rangan Gupta & Clement Kyei & Mark E. Wohar, 2016. "Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test," Open Economies Review, Springer, vol. 27(2), pages 229-250, April.
    3. Jungho Baek, 2021. "The role of crude oil prices in the movement of the Indonesian rupiah: a quantile ARDL approach," Economic Change and Restructuring, Springer, vol. 54(4), pages 975-994, November.
    4. Muhammad Shahbaz & Aviral Kumar Tiwari & Mohammad Iqbal Tahir, 2015. "Analyzing time-frequency relationship between oil price and exchange rate in Pakistan through wavelets," Journal of Applied Statistics, Taylor & Francis Journals, vol. 42(4), pages 690-704, April.
    5. Hyeyoen Kim & Doojin Ryu, 2013. "Forecasting Exchange Rate from Combination Taylor Rule Fundamental," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S4), pages 81-92, September.
    6. Danglun Luo & Qianwei Ying, 2014. "Political Connections and Bank Lines of Credit," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(03), pages 5-21, May.
    7. Agya Atabani Adi & Samuel Paabu Adda & Amadi Kingsley Wobilor, 2022. "Shocks and volatility transmission between oil price and Nigeria’s exchange rate," SN Business & Economics, Springer, vol. 2(6), pages 1-17, June.
    8. repec:wsr:wpaper:y:2011:i:072 is not listed on IDEAS
    9. Bing‐Yue Liu & Qiang Ji & Duc Khuong Nguyen & Ying Fan, 2021. "Dynamic dependence and extreme risk comovement: The case of oil prices and exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2612-2636, April.
    10. repec:wsr:wpaper:y:2011:i:071 is not listed on IDEAS
    11. Riane de Bruyn & Rangan Gupta & Renee van Eyden, 2013. "Forecasting The Rand-Dollar And Rand-Pound Exchange Rates Using Dynamic Model Averaging," Working Papers 201307, University of Pretoria, Department of Economics.

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    More about this item

    Keywords

    Oil prices; real exchange rates; cointegration; nonlinearities;
    All these keywords.

    JEL classification:

    • 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
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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