Time varying connectedness between foreign exchange markets and crude oil futures prices

Man Lu, Bisharat Hussain Chang, Asma Salman, Muthanna G. Abdul Razzaq and Mohammed Ahmar Uddin

Resources Policy, 2023, vol. 86, issue PB

Abstract: The relationship between crude oil futures and exchange rates has been the subject of several research studies. Through the utilization of a TVP-VAR (time-varying parameter VAR) extended joint connectedness methodology and the generalized connectedness technique to investigate the interconnectivity of oil futures prices of key oil-dependent nations and exchange rates, we contribute to the existing body of knowledge. Our findings indicate a time-varying nature of overall and pairwise connections, which typically intensifies during various periods such as the COVID-19 pandemic, Brexit, and the European sovereign debt crisis. The Japanese Yen and Russian Ruble appear as the primary recipients of net shocks, as suggested by both the generalized and joint connectedness methodologies. For other nations, similar methods yield conflicting results. Furthermore, there is clear evidence of time-dependent and bidirectional shock transmissions between the oil and foreign exchange markets. Our research provides valuable policy recommendations for stakeholders and diverse investors.

Keywords: Oil futures price; Foreign exchange; Dynamic connectedness; Time-varying parameter VAR (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:86:y:2023:i:pb:s0301420723008395

DOI: 10.1016/j.resourpol.2023.104128

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