Time-varying causality between oil price and exchange rate in five ASEAN economies


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KOÇOĞLU M., Kyophilavong P., Awan A., Lim S. Y.

Economic Change and Restructuring, 2022 (SSCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2022
  • Doi Number: 10.1007/s10644-022-09457-6
  • Journal Name: Economic Change and Restructuring
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, IBZ Online, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, Geobase
  • Keywords: ASEAN economies, Exchange rate, Oil price, Time-varying causality
  • Kayseri University Affiliated: No

Abstract

© 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.The aim of this study is to investigate the effect of oil price changes on the exchange rates of the five ASEAN economies. In the study, a rolling and recursive evolving window algorithm is applied to detect changes in the link between oil price and exchange rate from January 1988 to June 2022 for five ASEAN countries. We extend the existing literature using the Time-varying Granger causality model, which captures sensitivities across various time horizons. The findings revealed heterogeneous effects of oil price on the exchange rate at different time horizons in terms of importance and magnitude over time. Our empirical results support the combined movements of oil prices and exchange rates against some important dates and events. The findings provide investors with insight into the utility of the shock transmission mechanism and how central banks design market intervention policies.