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Economic Change and Restructuring

, Volume 52, Issue 3, pp 279–300 | Cite as

Revisiting the effects of oil prices on exchange rate: asymmetric evidence from the ASEAN-5 countries

  • Khalid M. KisswaniEmail author
  • Arezou Harraf
  • Amjad M. Kisswani
Article

Abstract

As the linear analysis of the oil price-exchange rate nexus failed to provide conclusive results, asymmetry analysis and nonlinear models recently emerged as new direction in examining this relationship. As such, this paper investigates the asymmetric relationship between oil prices and exchange rates for selected ASEAN countries, from 1970:Q1 to 2016:Q4. This is done by employing the nonlinear Autoregressive Distributed Lags (NARDL) approach of cointegration developed by Shin et al. (in: Horrace, Sickles (eds) Festschrift in honor of Peter Schmidt, Springer, New York, 2013). Furthermore, this paper pays attention to the importance of the presence of structural breaks in the data. The empirical results show long-run asymmetry for Indonesia and Malaysia only, when structural breaks are taken into consideration. The paper, additionally, examines the causality direction for the oil price-exchange rate nexus using the Toda and Yamamoto (J Econ 66:225–250, 1995) causality test. The findings show mixed results, since a bidirectional causality between oil price (increase and decrease) and exchange rate is found in some cases, but, a unidirectional causality running from oil price (either increase or decrease) to exchange rate, or running from exchange rate to oil price (either increase or decrease), is found in other cases.

Keywords

ASEAN Real oil prices Exchange rates NARDL Asymmetry 

JEL Classification

F31 F41 Q43 O53 

Notes

Acknowledgements

The authors would like to express their sincere gratitude to the Editor in Chief and two anonymous reviewers for their invaluable time and input. Their critical comments and suggestions have significantly improved the quality of this paper. The authors are fully responsible for any remaining shortcomings.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Khalid M. Kisswani
    • 1
    Email author
  • Arezou Harraf
    • 2
  • Amjad M. Kisswani
    • 3
  1. 1.Department of Economics and FinanceGulf University for Science and TechnologyHawallyKuwait
  2. 2.Department of Business AdministrationBox Hill College, KuwaitKuwait CityKuwait
  3. 3.Department of Workforce Development and Organizational LeadershipUniversity of NevadaLas VegasUSA

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