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Asymmetric adjustment between oil prices and exchange rates: Empirical evidence from major oil producers and consumers

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  • Ahmad, A.H.
  • Moran Hernandez, Ricardo

Abstract

This paper investigates the long-run relationship and asymmetric adjustment between the real oil prices and the real bilateral exchange rates of twelve major oil producers and consumers in the world. It uses threshold autoregressive, TAR, and momentum threshold autoregressive, M-TAR models. The data-set used is monthly series that covers 1970:01–2012:01. The results reveal the existence of cointegration in six of the twelve countries studied and cointegration and asymmetric adjustment in four countries of which Brazil, Nigeria and the UK show higher adjustment after a positive shock than after a negative shock while the Eurozone shows the opposite behaviour.

Suggested Citation

  • Ahmad, A.H. & Moran Hernandez, Ricardo, 2013. "Asymmetric adjustment between oil prices and exchange rates: Empirical evidence from major oil producers and consumers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 306-317.
    • Handle: RePEc:eee:intfin:v:27:y:2013:i:c:p:306-317
    DOI: 10.1016/j.intfin.2013.10.002
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    More about this item

    Keywords

    Exchange rates; Oil prices; Threshold cointegration; Asymmetry adjustments;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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