Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

5-1-2017

Abstract

We analyse the relationship between the oil prices, asset prices, and foreign exchange rates in the selected GCC economies, namely United Arab Emirates (UAE), Qatar, Kuwait and Saudi Arabia. Using a time-varying parameter VAR we study the coherence, conditional volatility and impulse responses of the exchange rates and stock markets to oil price shocks over specific periods and policy regimes. The model is identified using sign-restrictions imposed on the impulse responses over contemporaneous and long horizons. Our results suggest that the impact of oil prices on the exchange rate and asset prices are time dependent. Hence there is a loss in information when using standard linear models that average out effects over time. The response of the exchange rates and asset prices to oil prices weakens and strengthens depending on the regime of the markets. The period following financial crisis uniformly strengthens the relationships between the variables. The responses also vary across the GCC economies, emphasizing the fact that differences exists across these economies although their economic structures increasingly becoming similar.

Journal Title

Topics in Middle Eastern and North African Economies

ISSN

2334-282X

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

19

Issue

1

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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