The Effect of Oil Prices on Floating Exchange Rates
(2018) NEKN02 20181Department of Economics
- Abstract
- This thesis contributes to the existing literature by examining the effect of oil prices on floating exchange rates of oil dependent countries. I conduct empirical tests on monthly data of 32 currencies over a timeframe of 15 years from 2003 to 2017 and 13 currencies over a timeframe of 25 years from 1993 to 2017. The analysis, therefore, includes a large sample that has the drawback of a shorter sample, and a longer sample with fewer currencies which has not been the focus of previous research. Data is estimated using the VECM as some variables are co-integrated.
Empirical results show that in the shorter sample, exchange rates are affected by the price of oil a third of the sample, while the short-term interest rate affects exchange... (More) - This thesis contributes to the existing literature by examining the effect of oil prices on floating exchange rates of oil dependent countries. I conduct empirical tests on monthly data of 32 currencies over a timeframe of 15 years from 2003 to 2017 and 13 currencies over a timeframe of 25 years from 1993 to 2017. The analysis, therefore, includes a large sample that has the drawback of a shorter sample, and a longer sample with fewer currencies which has not been the focus of previous research. Data is estimated using the VECM as some variables are co-integrated.
Empirical results show that in the shorter sample, exchange rates are affected by the price of oil a third of the sample, while the short-term interest rate affects exchange rates in 37.5% of the sample. In the long-run, there is evidence of a relationship between oil prices and exchange rates in only 10% of the sample. In the longer sample, results indicate that oil prices have a direct effect on exchange rates in more than 50% of the sample in the short-run, while interest rates have no effect. And in the long-run, only 15% of the models show a long-run relationship with the price of oil. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8950243
- author
- Eshak, Maha LU
- supervisor
- organization
- course
- NEKN02 20181
- year
- 2018
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- VECM, VAR, oil prices, exchange rates, oil dependent countries, short-run causality, long-run causality, Granger, floating currencies, co-integration, ADF
- language
- English
- id
- 8950243
- date added to LUP
- 2018-07-02 15:39:51
- date last changed
- 2018-07-02 15:39:51
@misc{8950243, abstract = {{This thesis contributes to the existing literature by examining the effect of oil prices on floating exchange rates of oil dependent countries. I conduct empirical tests on monthly data of 32 currencies over a timeframe of 15 years from 2003 to 2017 and 13 currencies over a timeframe of 25 years from 1993 to 2017. The analysis, therefore, includes a large sample that has the drawback of a shorter sample, and a longer sample with fewer currencies which has not been the focus of previous research. Data is estimated using the VECM as some variables are co-integrated. Empirical results show that in the shorter sample, exchange rates are affected by the price of oil a third of the sample, while the short-term interest rate affects exchange rates in 37.5% of the sample. In the long-run, there is evidence of a relationship between oil prices and exchange rates in only 10% of the sample. In the longer sample, results indicate that oil prices have a direct effect on exchange rates in more than 50% of the sample in the short-run, while interest rates have no effect. And in the long-run, only 15% of the models show a long-run relationship with the price of oil.}}, author = {{Eshak, Maha}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Effect of Oil Prices on Floating Exchange Rates}}, year = {{2018}}, }