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Article
Publication date: 9 August 2011

Fredj Jawadi and Mondher Bellalah

While price studies such as Jawadi et al. generally focus on the relationships between oil and stock markets through the study of oil price on stock markets, this paper…

Abstract

Purpose

While price studies such as Jawadi et al. generally focus on the relationships between oil and stock markets through the study of oil price on stock markets, this paper takes a different perspective to the linkages between oil and stock markets. This study sets out to investigate the efficiency hypothesis for oil markets while testing for whether oil price dynamics depend on stock market fluctuations or not.

Design/methodology/approach

Using nonlinear econometric modeling, this paper investigates the oil market adjustment dynamics for four developed and emerging countries: France, the USA, Mexico and the Philippines. Our findings show strong evidence of significant linkages between oil and stock markets for all the countries under consideration.

Findings

As in Jawadi et al. who focus on stock price dynamics regarding oil price, the findings of this present paper, which focuses more on the oil industry, also point to an asymmetrical mean‐reversion between oil and stock markets that occurs in a nonlinear manner. They reject the informational efficiency hypothesis for oil markets. Indeed, while the previous literature often highlights the stock markets' dependence on the oil industry, this study contributes to the literature by concluding in favor of significant feedback from stock to oil markets, which is not compatible with the efficiency principle according to Fama.

Research limitations/implications

This paper develops a new nonlinear framework that should improve the investigation of oil‐stock market linkages. Future research could check the forecasting properties of this model to forecast the future dynamics of oil prices.

Originality/value

This paper adds to the literature by suggesting that it is not only oil shocks that affect stock markets, but that the latter also have a strong nonlinear impact on oil markets, reducing the diversification benefits of oil‐stock portfolios.

Details

Review of Accounting and Finance, vol. 10 no. 3
Type: Research Article
ISSN: 1475-7702

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Book part
Publication date: 31 December 2010

Mohamed El Hedi Arouri and Fredj Jawadi

Purpose – The purpose of this chapter is to investigate the linear and nonlinear short- and long-run relationships between the real price of oil and the US real effective…

Abstract

Purpose – The purpose of this chapter is to investigate the linear and nonlinear short- and long-run relationships between the real price of oil and the US real effective exchange rate.

Methodology/approach – We use recent linear and nonlinear econometric techniques over the period 1973–2009.

Findings – Our main findings are that (i) there is significant evidence that both variables contain a unit root; (ii) the oil price and the US exchange rate are strongly linked in the short run; and finally (iii) there are some signs of nonlinearity in the oil–exchange rate relationship.

Originality – Using recent econometric techniques, we show that exchange rates are not a fundamental determinant of oil prices but exchange rate changes help to better forecast oil prices in the short run.

Details

Nonlinear Modeling of Economic and Financial Time-Series
Type: Book
ISBN: 978-0-85724-489-5

Keywords

Content available
Article
Publication date: 14 July 2020

Trinh Thi Tuyet Pham and Nhan Phan Ai Le

This paper aims to analyse the asymmetric impacts of world oil price on macroeconomic variables in Vietnam, including domestic oil price, inflation and output growth.

Abstract

Purpose

This paper aims to analyse the asymmetric impacts of world oil price on macroeconomic variables in Vietnam, including domestic oil price, inflation and output growth.

Design/methodology/approach

The mixed data sampling (MIDAS) approach is employed to examine the impact of world oil price changes on macroeconomic variables as the former is high-frequency data (daily), and the latter is low-frequency data, usually monthly or quarterly.

Findings

Changes in world oil price cause asymmetric impacts on domestic oil price and inflation, but no significant effects on output growth. In terms of magnitude, a positive change in world oil price causes a stronger effect than a negative change in world oil price. In terms of timing, a positive change in world oil price causes a slow pass-through impact on domestic oil price and inflation. Meanwhile, domestic oil price and inflation decrease quickly following a negative change in world oil price.

Originality/value

This study investigates the asymmetric impact of oil price on the Vietnam economy in terms of both magnitude and timing, which is not explored by previous studies. In addition, it exploits daily information of oil price changes to analyse macroeconomic variables in lower frequency by employing MIDAS approach.

Details

Journal of Economics and Development, vol. 22 no. 2
Type: Research Article
ISSN: 1859-0020

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Article
Publication date: 1 January 1984

David Pearce and Ronald Edwards

As with many other developing economies, Egypt pursues a policy of keeping domestic energy prices below border prices. This entails both financial subsidies to energy…

Abstract

As with many other developing economies, Egypt pursues a policy of keeping domestic energy prices below border prices. This entails both financial subsidies to energy producers and users, and significant opportunity costs in terms of foregone foreign and government revenues. This article details the price structure and uses two models to assess the macroeconomic and microeconomic impacts of policies designed to correct the domestic/border price disparity.

Details

Journal of Economic Studies, vol. 11 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 10 July 2021

Sidi Mohammed Chekouri, Abdelkader Sahed and Abderrahim Chibi

This paper aims to examine the relationship between exchange rate and oil prices in Algeria over the period 2004Q1–2019Q4.

Abstract

Purpose

This paper aims to examine the relationship between exchange rate and oil prices in Algeria over the period 2004Q1–2019Q4.

Design/methodology/approach

The nonlinear autoregressive distributed lag method is used to capture the potential asymmetric relationship among oil prices and the exchange rate. Frequency domain spectral Granger causality test is also applied to investigate the causal linkage between the two variables. The wavelet coherence is applied to analyze the evolution of this relationship both in time and frequency domains.

Findings

The empirical results reveal evidence of long-run asymmetric effects of oil price on Algeria’s real effective exchange rate (REER), implying that an increase in oil price causes a real exchange rate to appreciate, while a decrease in oil price leads to a real exchange rate to depreciate. More specifically, it is found that the impact of negative oil price shocks is higher than the one associated with positive shocks. The spectral Granger causality results further indicate that there is unidirectional causality running from oil price to REER in both medium and long run. The wavelet coherence findings provide evidence of some co-movement between the REER and oil price and point out that the oil price is leading real exchange rate in the medium and long terms.

Originality/value

This study contributes to the literature by investigating the asymmetric impact and the time domain causal linkage between oil price fluctuations and real exchange rate in Algeria.

Details

International Journal of Energy Sector Management, vol. 15 no. 5
Type: Research Article
ISSN: 1750-6220

Keywords

Content available
Article
Publication date: 9 December 2019

Ahmed Samir Mahdi

The so-called “oil price war” of 2014-2016 took place between several main global oil producers; OPEC (led by Saudi Arabia), Russia and the newcomer; American tight oil or…

Abstract

Purpose

The so-called “oil price war” of 2014-2016 took place between several main global oil producers; OPEC (led by Saudi Arabia), Russia and the newcomer; American tight oil or fracking oil. These oil producers were competing against each other over market shares in the global oil market, by maintaining their high oil production rates, even if this led to a decline in oil prices and a reduction in revenues from oil sales. As energy politics need more coverage in International Political Economy (IPE) theory, this paper aims to argue that Saudi Arabia's policies during the oil price war of 2014-2016 reflected a policy of neomercantilism, which is the IPE equivalent of the school of realism in International Relations (IR).

Design/methodology/approach

This paper tests for neomercantilism by testing three of its main definitional components. The first definitional component is that the state, as the political authority, intervenes in the economic decisions. The second component is the primacy of the state interests over business corporate profits, or the primacy of political and security considerations over short-term economic and corporate profit considerations. The third is the zero-sum or relative gains nature of dealings between states. Afterwards, this paper tests for neomercantilism in the Saudi policy by examining how each of these definitional components is reflected in the Saudi policy during the oil price war.

Findings

As energy politics need more coverage in International Political Economy (IPE) theory, this paper argues that Saudi Arabia's policies during the oil price war of 2014-2016 reflected a policy of neomercantilism, which is the IPE equivalent of the school of realism in International Relations (IR).

Originality/value

As energy politics need more coverage in International Political Economy (IPE) theory, this paper argues that Saudi Arabia's policies during the oil price war of 2014-2016 reflected a policy of neomercantilism, which is the IPE equivalent of the school of realism in International Relations (IR).

Details

Review of Economics and Political Science, vol. 5 no. 1
Type: Research Article
ISSN: 2356-9980

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Expert briefing
Publication date: 3 August 2016

Azerbaijan's January-June contraction.

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Abstract

Details

Future Governments
Type: Book
ISBN: 978-1-78756-359-9

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Article
Publication date: 1 January 1975

S.O. Hashim

The energy crisis has hit the Third World countries, which can least afford high prices for energy and petrochemicals, much more harshly than the developed countries. The…

Abstract

The energy crisis has hit the Third World countries, which can least afford high prices for energy and petrochemicals, much more harshly than the developed countries. The following article by His Excellency S.O. Hashim, Ambassador of the Republic of Sudan in France, is a passionate voice from a Third World country calling for better cooperation between the affluent countries and the developing countries. Planning Review is indebted to the Society for International Development in Washington, D.C., for providing the text of Ambassador Hashim's speech, which we publish with minor editorial changes.

Details

Planning Review, vol. 3 no. 1
Type: Research Article
ISSN: 0094-064X

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Article
Publication date: 14 August 2021

Patrick Onodje, Temitope Ahmdalat Oke, Oluwatimilehin Aina and Nazeer Ahmed

The purpose of this paper is to examine the effect of crude oil prices on the Nigerian exchange rate with emphasis on discriminating between the effects of positive and…

Abstract

Purpose

The purpose of this paper is to examine the effect of crude oil prices on the Nigerian exchange rate with emphasis on discriminating between the effects of positive and negative changes in oil price on exchange rate.

Design/methodology/approach

The authors used monthly time series data from 1996:1 to 2019:6 and adopted two oil price measures, namely, Brent crude and West Texas Intermediary prices. For analysis, the authors used stepwise least squares to estimate a non-linear ARDL (NARDL) model and Wald tests to determine cointegration and the presence of asymmetric effects.

Findings

The findings showed that positive and negative Brent crude price changes significantly affect exchange rates differently in nominal terms, both in the long-run and short-run. However, the differences were purely in terms of effect size because the exchange rate decreased for both negative and positive oil price changes.

Originality/value

Whilst empirical research on asymmetries in the effect of oil price on exchange rate abounds, little evidence exists in Nigeria’s case. Although some studies previously tested for asymmetric oil price effects on the Nigerian currency, the approach used did not estimate long and short-run effects or test of long-run and short-run asymmetries. This paper fills this methodological gap using monthly using the NARDL approach. The NARDL approach provided the advantage of estimating effects for the long-run and short-run and testing for asymmetries in both time spans.

Details

International Journal of Energy Sector Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1750-6220

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