Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets

Jozef Baruník and Evžen KoÄ Enda
Authors registered in the RePEc Author Service: Evžen Kočenda and Jozef Baruník

The Energy Journal, 2019, vol. 40, issue 2_suppl, 157-174

Abstract: We analyze total, asymmetric and frequency connectedness between oil and forex markets using high-frequency, intra-day data over the period 2007-2017. By employing variance decompositions and their spectral representation in combination with realized semivariances to account for asymmetric and frequency connectedness, we obtain interesting results. We show that divergence in monetary policy regimes affects forex volatility spillovers but that adding oil to a forex portfolio decreases the total connectedness of the mixed portfolio. Asymmetries in connectedness are relatively small. While negative shocks dominate forex volatility connectedness, positive shocks prevail when oil and forex markets are assessed jointly. Frequency connectedness is largely driven by uncertainty shocks and to a lesser extent by liquidity shocks, which impact long-term connectedness the most and lead to its dramatic increase during periods of distress.

Keywords: Crude oil; Forex market; Volatility; Connectedness; Spillovers; Semivariance; Asymmetric effects; Frequency connectedness (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Journal Article: Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets (2019)
Working Paper: Total, asymmetric and frequency connectedness between oil and forex markets (2019)
Working Paper: Total, Asymmetric and Frequency Connectedness Between Oil and Forex Markets (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:40:y:2019:i:2_suppl:p:157-174

DOI: 10.5547/01956574.40.SI2.jbar

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