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Do fluctuations in crude oil prices have symmetric or asymmetric effects on the real exchange rate? Empirical evidence from Indonesia

Jungho Baek and Yoon Jung Choi

The World Economy, 2021, vol. 44, issue 1, 312-325

Abstract: Current research on the oil price impacts on exchange rates typically relies on the assumption that fluctuations in crude oil prices have symmetric impacts on a country's real exchange rate. Thus, the contribution of the paper is to use the non‐linear autoregressive distributed lag (ARDL) method of Shin, Yu, and Greenwood‐Nimmo (2014) and examine whether crude oil prices are asymmetrically passed on to the real exchange rate in the case of Indonesia. We uncover that oil price changes indeed asymmetrically affect the Indonesian rupiah in both the long and short run; i.e., the movement in the Indonesian rupiah appears to be more responsive to rising oil prices than to declining oil prices.

Date: 2021
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Handle: RePEc:bla:worlde:v:44:y:2021:i:1:p:312-325