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Oil prices, exchange rates and stock markets under uncertainty and regime-switching

David Roubaud () and Mohamed Arouri ()

Finance Research Letters, 2018, vol. 27, issue C, 28-33

Abstract: We contribute to the ongoing literature on the interactions between oil prices, exchange rates and stock markets by considering the effects of economic policy uncertainty (EUP). Based on a VAR and a multivariate Markov switching vector autoregressive (MS-VAR) models, we show (i) significant interrelations between currency, oil and stock markets; (ii) relationships between the variables are rather non-linear; (iii) links between the variables change from one regime to the next, but they are stronger during volatile periods; and (iv) oil plays an active role in the transmission of price shocks to both the exchange rate and stock markets.

Keywords: Oil price; US effective exchange rate; Stock markets; Uncertainty (search for similar items in EconPapers)
JEL-codes: E3 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Oil prices, exchange rates and stock markets under uncertainty and regime-switching (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:27:y:2018:i:c:p:28-33

DOI: 10.1016/j.frl.2018.02.032

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