Oil Prices, Exchange Rates and Emerging Stock Markets
Basher, Syed Abul; Haug, Alfred A.; Sadorsky, Perry
While two different streams of literature exist investigating 1) the relationship between oil prices and emerging market stock prices and 2) oil prices and exchange rates, relatively little is known about the relationship between oil prices, exchange rates and emerging stock markets. This paper proposes and estimates a structural vector autoregression to investigate the dynamic relationship between these variables. Impulse responses are calculated in two ways (standard, projection based methods). The model supports stylized facts. In particular, positive shocks to oil prices tend to depress emerging market stock prices and US dollar exchange rates in the short run.
Publisher: Department of Economics, University of Otago
Series number: 1014
Keywords: Emerging markets; oil prices; exchange rates
Research Type: Discussion Paper