Has COVID-19 intensified the oil price–exchange rate nexus?

Article Type

Research Article

Publication Title

Economic Analysis and Policy

Abstract

This paper extends the existing empirical literature by investigating whether the COVID-19 crisis has strengthened the dynamic relationships between oil price and exchange rate. We find significant breaks in the relationships wherein a common break is detected around the COVID-19 outbreak period. Of note, the interactions between the two markets intensified since the outbreak of the COVID-19 pandemic. Overall, our findings imply that the investors and policymakers are taking stock of the valuable information from the unanticipated occurrence of the COVID-19 pandemic. Thus, diversification in the form of portfolio switches towards foreign currency-denominated assets may be effective in the case of a depreciation of the domestic currency.

First Page

280

Last Page

298

DOI

10.1016/j.eap.2022.08.013

Publication Date

12-1-2022

Comments

Open Access, Green

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