Oil prices, exchange rates and emerging stock markets

Syed Abul Basher, Alfred A. Haug and Perry Sadorsky

MPRA Paper from University Library of Munich, Germany

Abstract: While two different streams of literature exist investigating 1) the relationship between oil prices and emerging market stock prices and 2) the relationship between oil prices and exchange rates, relatively little is known about the dynamic relationship between oil prices, exchange rates and emerging market stock prices. This paper proposes and estimates a structural vector autoregression model to investigate the dynamic relationship between these variables. Impulse responses are calculated in two ways (standard and projection based methods). The model supports stylized facts. In particular, positive shocks to oil prices tend to depress emerging market stock prices and US dollar exchange rates in the short run. The model also captures stylized facts regarding movements in oil prices. A positive oil production shock lowers oil prices while a positive shock to real economic activity increases oil prices. There is also evidence that increases in emerging market stock prices increases oil prices.

Keywords: Emerging market stock prices; oil prices; exchange rates (search for similar items in EconPapers)
JEL-codes: G15 Q43 (search for similar items in EconPapers)
Date: 2011-04-05
New Economics Papers: this item is included in nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Oil prices, exchange rates and emerging stock markets (2012)
Working Paper: Oil Prices, Exchange Rates and Emerging Stock Markets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30140

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