Search results
1 – 3 of 3Opeoluwa Adeniyi Adeosun, Mosab I. Tabash and Xuan Vinh Vo
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…
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.
Details
Keywords
Opeoluwa Adeniyi Adeosun, Suhaib Anagreh, Mosab I. Tabash and Xuan Vinh Vo
This paper aims to examine the return and volatility transmission among economic policy uncertainty (EPU), geopolitical risk (GPR), their interaction (EPGR) and five tradable…
Abstract
Purpose
This paper aims to examine the return and volatility transmission among economic policy uncertainty (EPU), geopolitical risk (GPR), their interaction (EPGR) and five tradable precious metals: gold, silver, platinum, palladium and rhodium.
Design/methodology/approach
Applying time-varying parameter vector autoregression (TVP-VAR) frequency-based connectedness approach to a data set spanning from January 1997 to February 2023, the study analyzes return and volatility connectedness separately, providing insights into how the data, in return and volatility forms, differ across time and frequency.
Findings
The results of the return connectedness show that gold, palladium and silver are affected more by EPU in the short term, while all precious metals are influenced by GPR in the short term. EPGR exhibits strong contributions to the system due to its elevated levels of policy uncertainty and extreme global risks. Palladium shows the highest reaction to EPGR, while silver shows the lowest. Return spillovers are generally time-varying and spike during critical global events. The volatility connectedness is long-term driven, suggesting that uncertainty and risk factors influence market participants’ long-term expectations. Notable peaks in total connectedness occurred during the Global Financial Crisis and the COVID-19 pandemic, with the latter being the highest.
Originality/value
Using the recently updated news-based uncertainty indicators, the study examines the time and frequency connectedness between key uncertainty measures and precious metals in their returns and volatility forms using the TVP-VAR frequency-based connectedness approach.
Details
Keywords
Opeoluwa Adeniyi Adeosun, Olumide Adeola Adeosun, Mosab I. Tabash and Suhaib Anagreh
The study aims to examine the relationship among economic policy uncertainty (EPU), geopolitical-risks (GPR), the interaction (EPGR) of EPU and GPR and the returns of gold…
Abstract
Purpose
The study aims to examine the relationship among economic policy uncertainty (EPU), geopolitical-risks (GPR), the interaction (EPGR) of EPU and GPR and the returns of gold, silver, platinum, palladium and rhodium using monthly data from January (1997) to May (2021).
Design/methodology/approach
The paper employs the Markov-switching and the novel Shi et al. (2020) bootstrap time-varying Granger-causality approach.
Findings
Though the Markov-switching shows variation in the responses of precious metals to EPU, GPR and EPGR across low and high states, the paper observes the safe-haven potential of the precious metals in the high regime while the hedging potency is also evident in the results. To further substantiate the safe-haven and hedging properties, the time-varying Granger-causality shows the causal effect of EPU on all the selected precious metal returns coinciding with global events. While the authors show that GPR Granger causes platinum, palladium and rhodium consistently under the rolling/recursive-evolving tests, the authors cannot find the causal effect of GPR on gold and silver returns across the algorithms. The paper also observes persistence in the causal effect of EPGR on palladium and platinum across all the algorithms, while gold and rhodium only show consistency in the responses under the rolling- and recursive-evolving algorithms given the conditions of homoscedasticity and heteroscedasticity.
Practical implications
The authors' results are essential to investors and policymakers since both typically leverage the hedging and safe-haven characteristics of precious metals to obviate downside risks during highly uncertain periods.
Originality/value
The authors' techniques allow examining the hedging and safe-haven properties of precious metals across regimes and date-stamp critical periods of causation inherent in the relationship.
Details