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Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently? A wavelet coherence analysis

Lu Yang (), Xiao Jing Cai and Shigeyuki Hamori ()

International Review of Economics & Finance, 2017, vol. 49, issue C, 536-547

Abstract: We contribute to the literature on the co-movement between the crude oil price and the exchange rate markets by studying their dynamics in the time and frequency domain. Employing the wavelet coherence framework, we find that the degree of co-movement between the crude oil price and the exchange rates deviates over time. Additionally, we find strong but not homogenous links around the year 2008 for all the countries included in the study and from 2005 onwards for the oil-exporting countries. However, the strong interdependence area is limited for the oil-importing countries. Moreover, we observe a negative relationship between the returns of the crude oil price and the exchange rates for the oil-exporting countries, while the relationships for the oil-importing countries are uncertain. Our results present new and interesting implications for investors and policy makers.

Keywords: G15; Q43; Oil price; Exchange rate; Wavelet coherence analysis; Co-movement (search for similar items in EconPapers)
Date: 2017
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