A Review of Econometric Approaches for the Oil Price-Exchange Rate Nexus: Lessons for ASEAN-5 Countries

Khalid Kisswani and Mahelet Fikru ()

Energies, 2023, vol. 16, issue 9, 1-15

Abstract: This paper reviews alternative econometric approaches the literature has used to examine the connectedness between oil prices and exchange rates and illustrates their application using quarterly data from 1970: Q1 to 2022: Q1 for ASEAN-5 countries, which are as follows: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Although most studies examining the impact of oil prices and exchange rates apply the Ordinary Least Squares (OLS) approach with symmetry, the quantile regression (QR) method is shown to offer a thorough investigation of the connectedness. For ASEAN-5 countries, we present a comparative analysis of both methodologies (OLS and QR) with and without asymmetry. Our findings suggest that asymmetric effects triggered by oil prices are noticeably heterogeneous across quantiles. Hence, future studies should allow for asymmetry in the oil price by decomposing the price into positive and negative changes to further investigate the connectedness between oil prices and exchange rates.

Keywords: quantile regression; oil price; exchange rate; asymmetries (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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