Empirical Analysis of Crude Oil Price Effects on Exchange Rate Volatility

Reinhold Kemati ()
Additional contact information
Reinhold Kemati: Senior Economist, Research Department, Bank of Namibia, Windhoek, Namibia

Empirical Economic Review, 2018, vol. 1, issue 2, 17-48

Abstract: This study examined the effects of crude oil price on nominal exchange rate volatility for oil and non-oil exporting countries. Immediately after the global financial crisis, the swings in the movement of crude oil price revealed how vulnerable the currencies of oil exporting countries and other commodity exporting countries. Using the Structural VAR method and the sample data from 2011 to 2016, the study estimated the effects of crude oil price on exchange rate stability and its impulse responses. Empirical results show that exchange rates for oil exporting countries are highly vulnerable to crude oil price shocks. As crude oil price declines, exchange rate volatility increases, similarly large crude oil price increases are associated with low exchange rate volatility. Currencies such as Angolan Kwanza, Russian Ruble, and Mexican Peso are very sensitive to crude oil price shocks. SVAR results show that oil price shocks significantly reduce exchange rate volatility of oil exporting countries. Meanwhile, the exchange rate volatility for non-oil exporting countries was driven by other factors than the price of crude oil.

Keywords: Commodities; External Supply Shocks; Foreign Exchange Rates; Open Economy; Macroeconomics; Prices (search for similar items in EconPapers)
JEL-codes: F31 F37 F41 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ojs.umt.edu.pk/index.php/eer/article/view/139/52 Full text (application/pdf)

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: https://EconPapers.repec.org/RePEc:ris:empecr:0007

Access Statistics for this article

Empirical Economic Review is currently edited by Muhammad Shahid Hassan

More articles in Empirical Economic Review from Department of Economics and Statistics, Dr Hassan Murad School of Management, University of Management and Technology, Lahore CII Johar Town Lahore. Contact information at EDIRC.
Bibliographic data for series maintained by Sidra Raza ( this e-mail address is bad, please contact ).