Oil Prices and Emerging Market Exchange Rates

Oil Prices and Emerging Market Exchange Rates

Title : Oil Prices and Emerging Market Exchange Rates
Number : 12/01
Author(s) : İbrahim Turhan, Erk Hacıhasanoğlu, Uğur Soytas
Language : English
Date : January 2012
Abstract : This paper investigates the role of oil prices in explaining the dynamics of selected emerging countries exchange rates. Using daily data series, the study concludes that a rise in oil price is leading to a significant appreciation in emerging economies currencies against the US dollar. In our study, we divide daily returns from 03/01/2003 to 02/06/2010 into 3 sub-samples and test the role of oil price changes on exchange rate movements. We employ generalized impulse response functions to trace out the dynamic response of each exchange rate in three different time periods. Our findings suggest that oil price dynamics are changing significantly in the sample period and the relation between oil prices and exchange rates becomes more relevant after the 2008 financial crisis.
Keywords : Oil prices, Emerging market exchange rates, Financial crisis
JEL Codes : F31; G01; Q43

Oil Prices and Emerging Market Exchange Rates
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