Dynamic linkages among international crude oil, exchange rate and Norwegian stock market: evidence from ARDL bound testing approach

Abstract

Purpose

The purpose of this paper is to examine the long-run association and short-run causality among oil price, exchange rate and stock market in Norwegian context.

Design/methodology/approach

This work uses auto regressive distributed lag (ARDL) bound co-integration test to examine the long-run association among international crude oil, exchange rate and Norwegian stock market. Further to test the causality, Toda–Yamamoto Granger causality test is used. Daily data ranging from 1 January, 2011 to 31 December, 2018 is used in this study.

Findings

Findings of this study suggest the existence of long-run equilibrium relationship among oil price, exchange rate and Norwegian stock market when oil price is taken as dependent variable. Further, this study observes the bi-directional causality between Norwegian stock market and exchange rate and unidirectional causality between oil and Norwegian stock market (from oil to stock market).

Originality/value

To the best of the authors’ knowledge, this the first study in context of Norway to explore the long-run association and causal relationships among international crude oil price, exchange rate and stock market index. Particularly, association of exchange rate and stock market largely remains unexplored for Norwegian economy. Further, majority of studies conducted in Norwegian setup have considered the period up to year 2010 and association of these variables is found to be time varying. Finally, this study uses ARDL bound co-integration test and Toda–Yamamoto Granger causality test. These methodologies have been used in literature in context of other countries like India and Mexico but not yet applied to study the Norwegian case.

Citation

Singhal, S., Choudhary, S. and Biswal, P.C. (2022), "Dynamic linkages among international crude oil, exchange rate and Norwegian stock market: evidence from ARDL bound testing approach", International Journal of Energy Sector Management, Vol. 16 No. 5, pp. 817-833. https://doi.org/10.1108/IJESM-10-2020-0006