Modelling systemic risk and dependence structure between the prices of crude oil and exchange rates in BRICS economies: Evidence using quantile coherency and NGCoVaR approaches

Aviral Tiwari, Nader Trabelsi, Faisal Alqahtani and Lance Bachmeier

Energy Economics, 2019, vol. 81, issue C, 1011-1028

Abstract: In this study, we examine the dependence structure and systemic risk between return series of the prices of crude oil and the BRICS exchange rates to US using the quantile coherency methods of Baruník and Kley (2015) and the nonparametric conditional value-at-risk granger causality test (hereafter NGCoVaR) of Diks and Wolski (2018) over the period 2005–2017. Further, we use the Hiemstra and Jones (1994, hereafter HJ) and Diks and Panchenko (2005, hereafter DP) tests for comparison purposes. Our findings indicate that all countries reveal significant negative dependence in the long-run dynamics between Oil prices and Brazilian, Indian, and South African currencies. HJ and DP tests suggest that lagged crude oil prices have predictive power for the Brazilian and Russian exchange rates. Furthermore, a robust unidirectional lagged dependence exists from the Brazilian exchange rate to crude oil prices. Concerning the Chinese, Indian, and South African currencies, we find no contagion effects from/to those countries to the oil market. For Russia, there is limited evidence of contagion effects. These findings provide insights for regulators and international investors.

Keywords: Quantile coherency; Systematic risk; Crude oil; Exchange rate; BRICS (search for similar items in EconPapers)
JEL-codes: C58 G01 G23 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:81:y:2019:i:c:p:1011-1028

DOI: 10.1016/j.eneco.2019.06.008

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