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The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework

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  • Tiwari, Aviral Kumar
  • Mutascu, Mihai Ioan
  • Albulescu, Claudiu Tiberiu

Abstract

The purpose of this paper is to assess the empirical influence of oil prices on the real effective exchange rate in Romania in a wavelet transform framework. More precisely, we investigate to what extent oil prices impact the real effective exchange rate in an Eastern European transition country, characterised by a low level of retail fuel prices and by an important growth rate of these prices as compared to the other EU countries. For this purpose we use a discrete wavelet transform approach and scale-by-scale Granger causality tests. We find that oil prices have a strong influence on the real effective exchange rate in the short run, but also for large time horizons. These results are important considering the fact that, in a classical Granger causality linear framework for the entire sample, we find that oil prices have no influence on the real effective exchange rate. The findings remain robust when resampling the initial 1986–2009 period, or when we use an alternative continuous wavelet transform. In addition, we discover that mainly the positive shocks associated with an increase in oil prices have an impact upon the real effective exchange rate movements in the short and long runs.

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  • Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2013. "The influence of the international oil prices on the real effective exchange rate in Romania in a wavelet transform framework," Energy Economics, Elsevier, vol. 40(C), pages 714-733.
    • Handle: RePEc:eee:eneeco:v:40:y:2013:i:c:p:714-733
    DOI: 10.1016/j.eneco.2013.08.016
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    More about this item

    Keywords

    Oil prices; Exchange rate nexus; Wavelet cross-correlation; Granger causality; Romania;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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