Energy prices and exchange rates in the Eurasian Economic Union: evidence from Fourier Toda-Yamamoto approach

Elif Hilal Nazlıoğlu and Ugur Soytas

Applied Economics, 2025, vol. 57, issue 24, 3253-3267

Abstract: Even though there is a growing literature on the co-movement between energy and currency markets, this issue is still unclear for the Eurasian Economic Union (EEU) countries. Based on this gap in the literature, the purpose of this study is to analyse the dynamic relationships between energy prices (crude oil and natural gas) and exchange rates for the EEU countries (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) for the 2015–2022 period by means of cointegration and causality approaches without and with structural shifts. While the cointegration test without structural change does not find uniform steady-state equilibrium, considering structural change in the cointegration model reveals the existence of the long-run relationship between exchange rates and energy prices. The causality analysis uncovers predictive information between energy and currency markets in the EEU countries driven by the oil market; and accounting for smooth structural breaks in causality analysis based on the Fourier Toda-Yamamoto approach reinforces these findings. The empirical findings hence imply a strong co-movement between energy and currency markets in the EEU countries shaped by the oil market.

Date: 2025
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DOI: 10.1080/00036846.2024.2336889

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