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Assessing the Asymmetric Effect of Local Realized Exchange Rate Volatility and Implied Volatilities in Energy Market on Exchange Rate Returns in BRICS

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  • Thobekile Qabhobho

    (Department of Economics, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa.)

Abstract

This paper investigates the leverage effect of local realised exchange rate volatility and implied volatilities in energy market on exchange rate returns in BRICS for the period May 7, 2012 to March 31, 2022, using the quantile regression technique. This paper reveals that oil implied volatility shocks (OVX changes) have a significant negative impact on Russian-U.S. Dollar exchange rate returns in all quantiles. When it comes to the Indian rupee and Chinese RMB returns/Dollar, the adverse effects of OVX are most apparent in both normal and booming market conditions. Although South Africa's currency rate returns are affected by both slump- and bust-market situations, Brazil also tends to be in higher quantiles. The implied volatility indices in the energy market have a substantial and considerable negative impact on the BRICS currencies, with the exception of China, where the effect is only noticeable in the upper extreme quantiles. The policy implications and suggestions are discussed.

Suggested Citation

  • Thobekile Qabhobho, 2023. "Assessing the Asymmetric Effect of Local Realized Exchange Rate Volatility and Implied Volatilities in Energy Market on Exchange Rate Returns in BRICS," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 231-239, March.
    • Handle: RePEc:eco:journ2:2023-02-25
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    More about this item

    Keywords

    Asymmetric Effect; BRICS; Implied Volatilities in Energy Market; Currency Returns; Quantile Regression;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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