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The U.S. Dollar Exchange Rate and the Demand for Oil

Selien De Schryder and Gert Peersman

Year: 2015
Volume: Volume 36
Number: Number 3
DOI: 10.5547/01956574.36.3.ssch
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Abstract:
Using recent advances in panel data estimation techniques, we find that an appreciation of the U.S. dollar exchange rate leads to a significant decline in oil demand for a sample of 65 oil-importing countries. The estimated effect turns out to be considerably larger than the impact of a shift in the global crude oil price expressed in U.S. dollar. This finding appears to be the consequence of a stronger pass-through of changes in the U.S. dollar exchange rate to domestic end-user oil products prices relative to changes in the global crude oil price. Furthermore, we demonstrate the relevance of U.S. dollar fluctuations for global oil price dynamics.



Do Jumps and Co-jumps Improve Volatility Forecasting of Oil and Currency Markets?

Fredj Jawadi, Waël Louhichi, Hachmi Ben Ameur, and Zied Ftiti

Year: 2019
Volume: Volume 40
Number: Special Issue
DOI: 10.5547/01956574.40.SI2.fjaw
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Abstract:
This paper aims at modeling and forecasting volatility in both oil and USD exchange rate markets using high frequency data. We test whether extreme co-movements (co-jumps) between these markets, as well as intraday unexpected news, help to improve volatility forecasting or not. Accordingly, we propose different extensions of Corsi (2009)'s model by including co-jumps and news. Our analysis provides two interesting findings. First, we find that both markets exhibit significant co-jumps driven by unexpected macroeconomic news. Second, we show that our model outperforms Corsi (2009)'s model and provides more accurate forecasts. In particular, while co-jumps constitute a key variable in forecasting oil price volatility, the unexpected news is relevant to forecasts of USD exchange rate volatility.





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