Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

9-1-2016

Abstract

The aim of this paper is to investigate the exchange rate consequences of oil-price fluctuations across selected MENA countries (including both commodity importers and exporters) and to examine the dynamic relationship between such shocks. We employed the asymmetry of volatility through the GJR-GARCH model using daily time series data covering the period between 2001 and mi-2015. We refer to impulse responses functions in order to test the dynamic relationships. Empirical results reveal that foreign exchange market and crude oil exhibit asymmetric and no asymmetric in the return series. Additionally, the findings show asymmetric response of volatilities to positive and negative shocks. Furthermore, the results suggest that there is a dynamic relationship among oil price shocks and exchange rate volatility. Indeed, in the short run, oil prices shocks had a significant impact on exchange rate changes. Finally, we found that in the case of oil-exporting country, the oil prices rise may experience exchange rate appreciation, while, the decrease of oil price leads to appreciation of the currency of oil importing countries. This implies that oil prices are a key variable in determining the strength of the currency and its volatility. Therefore, policy makers of most MENA countries should consider exchange rate and oil price fluctuations on their macroeconomic policies and diversify more their economics.

Journal Title

Topics in Middle Eastern and North African Economies

ISSN

2334-282X

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

18

Issue

2

Comments

Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who have retained all copyrights in the articles.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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