ASEAN-5 forex rates and crude oil: Markov regime-switching analysis
Source of Publication
We investigate the influence of moves in oil prices on exchange rates of Indonesia, Malaysia, the Philippines, Singapore and Thailand (the ASEAN-5 countries). We disentangle oil shocks, representing them by three components: demand shock, supply shock and risk shock, and examine their impact on the ASEAN-5 exchange rates by employing high-/low-volatility Markov regime-switching regressions for the period 2006 to Beckmann, Czudaj, and Arora 2020. We find that demand shocks make forex rates increase for net oil-producing as well as net oil-consuming economies. The impacts of supply shocks on forex rates for most economies are rather low. The risk shocks lead to depreciating effects on the ASEAN-5 currencies, supporting the notion that the open-oriented nature of ASEAN-5 economies makes them susceptible to constant fluctuations in the global oil market.
Informa UK Limited
ASEAN-5, Energy markets, exchange rate, Markov-switching model, oil-market shocks
Aziz, Mukhriz Izraf Azman; Umar, Zaghum; Gubareva, Mariya; Sokolova, Tatiana; and Vo, Xuan Vinh, "ASEAN-5 forex rates and crude oil: Markov regime-switching analysis" (2022). All Works. 5220.
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