Economics at your fingertips  

A wavelet-based nonlinear ARDL model for assessing the exchange rate pass-through to crude oil prices

Rania Jammazi (), Amine Lahiani and Duc Khuong Nguyen

Journal of International Financial Markets, Institutions and Money, 2015, vol. 34, issue C, 173-187

Abstract: We investigate whether changes in the US dollar exchange rates of 18 currencies help explain the movements in the price of crude oil by using a wavelet-based nonlinear autoregressive distributed lags model (W-NARDL). This model allows one to capture the short- and long-run nonlinearities while taking into account the potential of extreme movements and excluding the noise components of the underlying data. We find evidence of significant and asymmetric pass-through of exchange rates to oil prices in both the short and long run. In particular, the long-run negative changes in exchange rates (dollar depreciation) exert a greater impact on oil prices than do the long-run positive changes (dollar appreciation), even though the sign of the effect is commonly negative in most cases. Our results finally suggest that denoising the crude oil and exchange rate data is effective and necessary before their interactions can be analyzed.

Keywords: Oil prices; US dollar exchange rates; Wavelet; NARDL (search for similar items in EconPapers)
JEL-codes: C52 C53 F31 G17 Q43 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.intfin.2014.11.011

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-10-22
Handle: RePEc:eee:intfin:v:34:y:2015:i:c:p:173-187