Do exchange rate and inflation rate matter in the cyclicality of oil price and stock returns?

Abiodun S. Philips, Ademola B. Akinseye and Gabriel O. Oduyemi

Resources Policy, 2022, vol. 78, issue C

Abstract: The cyclicality of oil prices and stock returns in oil-exporting and oil-importing countries is investigated in this study. We considered the role of asymmetry along with the impact of inflation and exchange rate on the cyclical relationship. The cycle component of oil prices and stock returns is extracted using the Hamilton Filter, and the slope coefficient homogeneity is determined using the Swamy (1970) test. The nonlinear Panel ARDL developed by Shin et al. (2014) is employed as the estimation method to study the cyclical nexus of oil price and stock returns. Our findings indicate that when asymmetry is taken into account, the influence of inflation rate on the cyclical link between oil prices and stock returns is insignificant. However, we find the role of exchange rate significant. We find that the exchange rate transforms an initially procyclical link between the oil price and stock returns in oil-exporting nations into a short-run countercyclical relationship. It also transforms a supposedly countercyclical relationship between oil price and stock returns in oil-importing into a long-run procyclical relationship. Overall, the exchange rate is critical to the cyclicality of oil prices and stock returns, whereas inflation is negligible.

Keywords: Oil price; Stock returns; Cyclicality; Exchange rate; Inflation rate; NARDL (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420722003270
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:78:y:2022:i:c:s0301420722003270

DOI: 10.1016/j.resourpol.2022.102882

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

More articles in Resources Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().