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Oil prices, news-based uncertainty measures and exchange rate returns in BRICS countries

Opeoluwa Adeniyi Adeosun (Department of Economics, Faculty of Social Sciences, Obafemi Awolowo University, Ile-Ife, Nigeria)
Mosab I. Tabash (College of Business, Al Ain University, Al Ain, United Arab Emirates)
Xuan Vinh Vo (Institute of Business Research, University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam)

International Journal of Energy Sector Management

ISSN: 1750-6220

Article publication date: 6 December 2022

31

Abstract

Purpose

This paper aims to accommodate the influence of both economic policy uncertainty and geopolitical risks in the relationship between oil price and exchange-rate returns in the Brazil, Russia, India, China and South Africa (BRICS) countries through an interaction term (EPGR).

Design/methodology/approach

The authors use continuous wavelet transform (CWT), wavelet coherence (WC) and partial wavelet coherence (PWC). First, the authors apply the CWT to examine the evolution of oil prices, EPGR and exchange rate returns. Second, the authors use WC to investigate the relationship between oil price and exchange rate returns (excluding EPGR). Third, the authors use PWC to account for EPGR’s impact on the oil exchange rate returns dynamics and explore partial correlations in the oil and exchange rate returns dynamics.

Findings

The empirical results generally show that EPGR is a key driver in the oil and exchange rate returns nexus.

Practical implications

The relevance of EPGR in influencing exchange rate volatility is confirmed by the findings. As a result, it is critical for government officials and foreign exchange investors to use EPGR as a leading indicator when establishing foreign exchange trading strategies and economic forecasts.

Originality/value

This study is the first, to the best of the authors’ knowledge, to apply a wavelet-based technique to account for EPGR in the relationship between oil and exchange rate returns in the BRICS countries.

Keywords

Acknowledgements

The authors appreciate the anonymous reviewer and the editorial team.

This research is funded by the University of Economics, Ho Chi Minch City, Vietnam.

Conflict of interest: None declared by the authors.

Citation

Adeosun, O.A., Tabash, M.I. and Vo, X.V. (2022), "Oil prices, news-based uncertainty measures and exchange rate returns in BRICS countries", International Journal of Energy Sector Management, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJESM-02-2022-0005

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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