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The Asymmetric Relationship Between Oil Price Fluctuation on Exchange Rate Variation: Empirical Evidence from Malaysia and Thailand

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  • Mohd Jaffri Abu Bakar

    (Faculty of Business Management, Universiti Sultan Zainal Abidin, 21300 Kuala Terengganu, Malaysia)

  • Nanthakumar Loganathan

    (Faculty of Management, Universiti Teknologi Malaysia, 81310 Johor Bahru, Johor, Malaysia)

  • Tirta Nugraha Mursitama

    (International Relations Department, Bina Nusantara University, Jakarta, Indonesia 11480)

  • Yogeeswari Subramaniam

    (Faculty of Management, Universiti Teknologi Malaysia, 81310 Johor Bahru, Johor, Malaysia)

Abstract

The purpose of this study is to investigate the effects of oil price fluctuations on exchange rate variations, particularly for Malaysia and Thailand. The study utilizes monthly observation data from 1994 to 2021 and uses structural breaks, cointegration relationships, and Nonlinear Autoregressive Distributed Lag (NARDL) estimates. Both countries had distinct long- and short-term relationships, but there was also an asymmetric relationship between oil prices and multilateral exchange rates revealed by the study. The asymmetric and non-asymmetric causality relationship for both countries indicate a unidirectional non-asymmetric causality between the oil price and the exchange rate variation. The empirical findings will be of great assistance to policymakers in evaluating global oil price fluctuations as a crucial indicator for monitoring and stabilizing currencies as a long-term monetary policy strategy.

Suggested Citation

  • Mohd Jaffri Abu Bakar & Nanthakumar Loganathan & Tirta Nugraha Mursitama & Yogeeswari Subramaniam, 2024. "The Asymmetric Relationship Between Oil Price Fluctuation on Exchange Rate Variation: Empirical Evidence from Malaysia and Thailand," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 810-828, December.
    • Handle: RePEc:nwe:eajour:y:2024:i:4:p:810-828
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    More about this item

    Keywords

    exchange rate; asymmetric; NARD estimates; oil price;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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