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Visiting the effects of oil price shocks on exchange rates: Quantile-on-quantile and causality-in-quantiles approaches

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  • Jiang, Yonghong
  • Feng, Qidi
  • Mo, Bin
  • Nie, He

Abstract

We employ the relatively novel quantile-on-quantile and causality-in-quantiles approaches to empirically address the effects of oil price shocks on exchange rates of developed and developing countries. We find the evidence of the effects of oil shocks on exchange rates vary across quantiles. In addition, the effects and causality of oil price shocks are asymmetric and the slope of the coefficient in quantile-on-quantile analysis shows a relatively extreme fluctuation. Furthermore, for the developed currencies, the Granger causal relationship in both the mean and the variance running from oil shocks to exchange rates is always evident at all quantiles, while for the developing countries, the causal flow in the first and second moments is insignificant at middle quantiles.

Suggested Citation

  • Jiang, Yonghong & Feng, Qidi & Mo, Bin & Nie, He, 2020. "Visiting the effects of oil price shocks on exchange rates: Quantile-on-quantile and causality-in-quantiles approaches," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940820300589
    DOI: 10.1016/j.najef.2020.101161
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    Keywords

    Crude oil; Exchange rates; Quantile-on-quantile; Causality-in-quantiles;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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