Oil Price and Exchange Rates: A Wavelet Analysis for OPEC Members

Authors

  • Basheer H. M. Altarturi
  • Ahmad Alrazni Alshammri
  • Tuan Muhd Taufik Tuan Hussin
  • Buerhan Saiti International Islamic University Malaysia

Abstract

This paper studies the relationship between oil price and the exchange rates of OPEC members from February 1999 to March 2016. The wavelet method is applied to combine information from both time and frequency domains, which does not require stationary and decomposition of original time series data. The study found that the strength of the relationship between oil price and exchange rate divides into three main categories, namely oil price leads exchange rate, exchange rate leads oil prices, and the relationship keeps changing. Countries which currencies pegged to USD are lagging against oil price changes, countries with floating exchange rates and countries with an undisclosed weighted basket of international currencies leads the changes in oil price, and countries which their currencies pegged to Special Drawing Right (SDR) experience changing relationships. This finding suggests that the central banks of OPEC member countries should give importance to shocks on oil prices, while formulating their own exchange rate policy.Keywords: Wavelet coherence, oil price, exchange rate, OPECJEL Classifications: C58, F31, Q02

Downloads

Download data is not yet available.

Downloads

Published

2016-07-22

How to Cite

Altarturi, B. H. M., Alshammri, A. A., Tuan Hussin, T. M. T., & Saiti, B. (2016). Oil Price and Exchange Rates: A Wavelet Analysis for OPEC Members. International Journal of Energy Economics and Policy, 6(3), 421–430. Retrieved from https://econjournals.net.tr/index.php/ijeep/article/view/2253

Issue

Vol. 6 No. 3 (2016)

Section

Articles

License

Submission of an article implies that the work described has not been published previously , that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.