What determines the long-term correlation between oil prices and exchange rates?

作者：Yang, Lu; Cai, Xiao Jing; Hamori, Shigeyuki^*

来源：North American Journal of Economics and Finance, 2018, 44: 140-152.

DOI：10.1016/j.najef.2017.12.003

• Oil price
• Exchange rate
• GARCH-MIDAS
• DCC-MIDAS

In this study, we obtain the long-term correlation between oil prices and exchange rates by employing the dynamic conditional correlation-mixed data sampling (DCC-MIDAS) model. We then identify the factors that influence the long-term correlation using panel data analysis. We find that the long-run correlations between oil prices and exchange rates are negative for all oil exchange rate markets except Japan. We also find that both inflation and term spread have negative effects, while the risk-free interest rate has a positive effect on the long-term correlation between oil prices and exchange rates. Importantly, the empirical results show that an increase in inflation will significantly damage the real value of the currency itself.

• 出版日期2018-4
• 单位中南财经政法大学