Further Evidence on Asymmetry in the Impact of Oil Price on Exchange Rate and Stock Price in China using Daily Data

摘要

The role of oil price on the macro-economy has been intensely researched. However, oil remains one of the most important energy sources for production. Concerning China, there are projections that the country’s energy consumption would have risen to 18 billion barrels per day in the next two decades. Given China’s heavy reliance on oil, we reexamine the impact of oil price on the US dollar-Renminbi rate and the Shanghai index using daily data from 4/01/2010 to 29/03/2021. In our analysis, we apply the Nonlinear ARDL technique in the presence of structural breaks and find that oil price has asymmetric impact on exchange rate and stock price in the short-run alone. However, the asymmetry is only in terms of magnitude and not in terms of effect direction. Oil price is found to appreciate the Renminbi vis-à-vis the US dollar and to increase stock price significantly both in the short-run. We find that accounting for structural breaks is necessary for cointegration in using oil price to explain both variables.