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Oil price and exchange rate in India: Fresh evidence from continuous wavelet approach and asymmetric, multi-horizon Granger-causality tests

Aviral Tiwari () and Claudiu Albulescu ()

Applied Energy, 2016, vol. 179, issue C, 272-283

Abstract: We use a continuous wavelet approach and deploy asymmetric, multi-horizon Granger-causality tests between the return series of the oil price and the India-US exchange rate, over the time-span 1980M1–2016M2. The results highlight important co-movements in the post-reform period, especially for the 2–4-years band. The wavelet Granger-causality tests show that the exchange rate Granger-causes the oil price in the long run, while the opposite applies in the short run. Moreover, we find that the Granger-causal relationship between variables is non-linear, asymmetric and indirect, which will help policymakers and traders to make better strategic and investment decisions.

Keywords: Cyclical and anti-cyclical effects; Wavelet coherence; Oil price-exchange rate; Granger causality; India (search for similar items in EconPapers)
JEL-codes: C40 E32 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:appene:v:179:y:2016:i:c:p:272-283