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Exchange rates of oil exporting countries and global oil price shocks: A nonlinear smooth-transition approach

Alfred Haug () and Syed Basher ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper considers logistic (asymmetric) and exponential (symmetric) smooth transition adjustments of real and nominal exchange rates for six major oil-exporting countries in response to different shocks affecting oil prices. Real exchange rate movements affect the terms of trade and hence may affect relative competitiveness. We detect no statistically significant non-linearities for the adjustment process of real exchange rate returns, be they asymmetric or symmetric, in response to oil supply shocks, idiosyncratic oil-market-specific shocks, and speculative (crude oil inventory) oil-market shocks. On the other hand, global aggregate demand shocks, which are shocks that do not directly originate in the oil market, have nonlinear asymmetric effects on real exchange rate returns for Canada, Mexico, Norway and Russia, and linear effects for the UK. These qualitative results mostly hold for nominal exchange rate returns as well. Exceptions are that linear effects are found for aggregate demand shocks for Brazil and for idiosyncratic shocks for Norway, whereas the aggregate demand shocks for the UK have nonlinear and asymmetric effects instead of linear ones.

Keywords: Logistic and exponential smooth transition; oil price shocks; exchange rates (search for similar items in EconPapers)
JEL-codes: F31 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-ene and nep-opm
Date: 2017-12-07
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Related works:
Working Paper: The impact of oil price shocks on exchange rates: A non-linear smooth-transition approach (2016) Downloads
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