The role of crude oil prices in the movement of the Indonesian rupiah: a quantile ARDL approach

Jungho Baek

Economic Change and Restructuring, 2021, vol. 54, issue 4, No 3, 975-994

Abstract: Abstract The linkages between oil prices and exchange rates have been researched considerably. However, studies to date typically assume symmetric responses of exchange rates to changes in crude oil prices and use a symmetric linear regression model when tackling the topic. Therefore, the new contribution of this article is to utilize the quantile autoregressive distributed lag approach newly developed by Cho et al. (J Econom 188:281–300, 2015) and investigate whether or not evidence of locational asymmetries exists between oil prices and the Indonesian rupiah (IDR). We detect that the relationship between oil prices and IDR is heterogeneous across different quantiles, thereby providing evidence of locational asymmetries in both the long- and short-run. We believe that this discovery has profound implications on empirical modeling of the oil price–exchange rate nexus and policy analysis.

Keywords: Indonesia; Oil prices; Quantile ARDL; Rupiah (search for similar items in EconPapers)
JEL-codes: C22 F31 Q43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s10644-020-09304-6

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