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Copula-Based Modelling of Relationship Between Dollar/Rouble Exchange Rate and Oil Prices

Andrey Bedin (), Alexander Kulikov () and Andrey Polbin
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Andrey Bedin: RANEPA; MIPT
Alexander Kulikov: RANEPA; MIPT

Russian Journal of Money and Finance, 2023, vol. 82, issue 3, 87-109

Abstract: Oil prices are an important factor defining the dynamics of the rouble exchange rate. In this paper, we use the copula approach to describe the impact of oil prices on the rouble exchange rate in 2016–2021 on weekly and monthly data. To model one-dimensional distributions of log oil price growth and log US dollar/rouble exchange rate growth, we compare approaches using empirical distributions and calibrated parametric distributions. We show that, even though the best copula for both weekly and monthly data is the Student copula, the response of the exchange rate to oil price changes is asymmetrical due to the higher skewness of the distribution of log exchange rate growth. The copulas considered in this paper are tested for goodness-of-fit. We also test the model on 2022 data.

Keywords: copula; rouble exchange rate; oil price; nonlinear econometric models (search for similar items in EconPapers)
JEL-codes: C51 C52 F31 Q43 (search for similar items in EconPapers)
Date: 2023
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Handle: RePEc:bkr:journl:v:82:y:2023:i:3:p:87-109