Revealing the nexus between oil and exchange rate in the major emerging markets-The timescale analysis

摘要

This paper investigates the interrelationship between Brent oil price and exchange rate in 10 emerging markets of East Europe, Asia, Africa, and South America. For computational purpose, we apply two innovative methodologies-wavelet coherence and phase difference that are capable of observing different frequency scales. Wavelet coherence results suggest that strong coherence is present during world financial crisis (WFC) in the oil-exporting countries and in majority of the oil-importing countries. Phase arrows as well as phase difference suggest negative coherence between oil and exchange rates in the oil-importing countries during WFC. Negative coherence is found in these countries because currency depreciation was accompanied by immense oil price drop in WFC period. In addition, phase difference has relatively stable in-phase dynamics in long term in the oil-importing countries during tranquil periods, which confirms theoretical stance that higher oil prices cause currency depreciation and vice versa. As for the oil-exporting countries, we find constant and relatively long-lasting anti-phase pattern in Russian and Nigerian cases for long-term horizons but not for Brazilian one.