Has COVID-19 intensified the oil price–exchange rate nexus?

Kushal Banik Chowdhury and Bhavesh Garg

Economic Analysis and Policy, 2022, vol. 76, issue C, 280-298

Abstract: This paper extends the existing empirical literature by investigating whether the COVID-19 crisis has strengthened the dynamic relationships between oil price and exchange rate. We find significant breaks in the relationships wherein a common break is detected around the COVID-19 outbreak period. Of note, the interactions between the two markets intensified since the outbreak of the COVID-19 pandemic. Overall, our findings imply that the investors and policymakers are taking stock of the valuable information from the unanticipated occurrence of the COVID-19 pandemic. Thus, diversification in the form of portfolio switches towards foreign currency-denominated assets may be effective in the case of a depreciation of the domestic currency.

Keywords: Exchange rate; Oil price; Volatility; COVID-19 (search for similar items in EconPapers)
JEL-codes: C22 F31 G15 Q41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:76:y:2022:i:c:p:280-298

DOI: 10.1016/j.eap.2022.08.013

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