Oil Price Fluctuations and Exchange Rate Dynamics in the MENA Region: Evidence from Non-Causality-in- Variance and Asymmetric Non-Causality Tests

Ridha Nouira, Thouraya Hadj Amor and Christophe Rault

No 7201, CESifo Working Paper Series from CESifo

Abstract: The aim of this paper is to investigate the exchange rate consequences of oil-price fluctuations and to test for the dynamics of oil price volatility by examining interactions between oil market and exchange rate in selected MENA countries (Egypt, Jordan, Morocco, Qatar, Saudi Arabia, Tunisia, and UAE). Using daily time series data covering the period from January 1, 2001 to December 29, 2017, we implement the test for asymmetric non-causality of Hatemi-J (2012), the asymmetric generalized impulse response functions of Hatemi-J (2014), and the test for noncausality-in-variance of Hafner and Herwartz (2006) to examine the presence of volatility spillover between oil prices and exchange rates return series. The econometric investigation reveals in particular that i) when prices are rising in Tunisia and Saudi Arabia, oil prices cause change in exchange rates, and ii) there is significant evidence of volatility spillovers from oil markets to exchange rate markets in the selected MENA countries. These findings have important implications both from the investor's and from the policy-maker's perspective.

Keywords: oil price shocks; exchange rate volatility; asymmetric causality test; asymmetric; generalized impulsion functions; causality-in-variance tests; MENA countries (search for similar items in EconPapers)
JEL-codes: F31 G01 Q43 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ara, nep-ene and nep-ets
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Citations: View citations in EconPapers (7)

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Journal Article: Oil price fluctuations and exchange rate dynamics in the MENA region: Evidence from non-causality-in-variance and asymmetric non-causality tests (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7201

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