Unveiling the Time-dependent Dynamics between Oil Prices and Exchange Rates: A Wavelet-based Panel Analysis

Hyunjoo Kim Karlsson, Kristofer Månsson, and Pär Sjölander
Authors registered in the RePEc Author Service: Hyunjoo Kim Karlsson

The Energy Journal, 2020, vol. Volume 41, issue Number 6, 87-106

Abstract: The objective of this paper is to re-examine the relationship between real oil prices and real effective exchange rates (REER) for major oil-exporting countries with floating exchange rates. We apply the wavelet-based principles of Gallegati et al. (2016) using monthly data for the period 1996 to 2015. In contrast to many previous studies, our results support the theoretically expected positive nexus between the real oil prices and REER for our dataset. This (theoretically-expected) positive relationship is stronger at the larger time scales (that is, at the 4-8 and 8-16 month wavelet scales) compared to the smaller time scales (that is, at the 1-2 and 2-4 month wavelet scales). The findings of this study therefore add to the existing literature, since they disentangle the specific relationship between oil prices and exchange rates at different time scales, which has important policy implications.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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