Title

Dynamic connectedness of oil price shocks and exchange rates

Author First name, Last name, Institution

Farooq Malik, Zayed University
Zaghum Umar, Zayed University

Document Type

Article

Source of Publication

Energy Economics

Publication Date

10-1-2019

Abstract

© 2019 Elsevier B.V. Using a novel method of isolating the oil price shocks, we study how different sources of oil price shocks are connected to exchange rates of major oil-dependent countries using daily data from March 1996 to February 2019. We find that oil price shocks resulting from changes in demand and risk significantly contribute to variation in exchange rates, while supply shocks have virtually no impact. The connectedness of this relationship between oil price shocks and exchange rates has significantly increased after the global financial crisis. We also find that oil price shocks do not explain the variation in exchange rate volatility but we document significant volatility connectedness among exchange rates. Our findings have important implications for policy makers and financial market participants.

ISSN

0140-9883

Publisher

Elsevier B.V.

Volume

84

First Page

104501

Disciplines

Business

Keywords

Connectedness, Exchange rates, Oil

Scopus ID

85071575856

Indexed in Scopus

yes

Open Access

no

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