Does oil price have similar effects on the exchange rates of BRICS?
Boqiang Lin () and
International Review of Financial Analysis, 2020, vol. 69, issue C
Motivated by the crucial status of oil price and exchange rates in world finance and economy, we apply daily data from August 2005 to February 2019 to investigate the impact of oil price shocks on the exchange rate of BRICS countries. This paper first adopts a new framework and EEMD method to decompose oil shocks and exchange rate series, respectively. With these econometric methods, the final research variables in this paper are constructed, including two types of oil shocks and three kinds of exchange rate series. The ARDL approach and VAR model are then employed to detect the influence of oil shocks on exchange rates in different frequencies, corresponding to the stationarity of series. The evidence, based on the original exchange rate series reveals that two oil price shocks can produce different effects on net oil-importing countries and net oil-exporting countries, while the results from different frequencies show that exchange rates will have a significant response to oil shocks only at a high frequency. It is worth noting that China is a unique case in BRICS, the relations between its exchange rate and oil price shocks is far insignificant than that of the other countries.
Keywords: Oil price shocks; Exchange rate; Ensemble empirical mode decomposition (EEMD); ARDL-bounds; BRICS (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:69:y:2020:i:c:s105752191930362x
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