Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets
Result description
We analyze total, asymmetric and frequency connectedness between oil and forex markets using high-frequency, intra-day data over the period 2007–2017. By employing variance decompositions and their spectral representation in combination with realized semivariances to account for asymmetric and frequency connectedness, we obtain interesting results. We show that divergence in monetary policy regimes affects forex volatility spillovers but that adding oil to a forex portfolio decreases the total connectedness of the mixed portfolio. Asymmetries in connectedness are relatively small. While negative shocks dominate forex volatility connectedness, positive shocks prevail when oil and forex markets are assessed jointly. Frequency connectedness is largely driven by uncertainty shocks and to a lesser extent by liquidity shocks, which impact long-term connectedness the most and lead to its dramatic increase during periods of distress.
Keywords
Crude oilForex marketVolatilityConnectednessSpilloversSemivarianceAsymmetric effectsFrequency connectedness
The result's identifiers
Result code in IS VaVaI
Alternative codes found
RIV/00216208:11230/19:10473018
Result on the web
DOI - Digital Object Identifier
Alternative languages
Result language
angličtina
Original language name
Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets
Original language description
We analyze total, asymmetric and frequency connectedness between oil and forex markets using high-frequency, intra-day data over the period 2007–2017. By employing variance decompositions and their spectral representation in combination with realized semivariances to account for asymmetric and frequency connectedness, we obtain interesting results. We show that divergence in monetary policy regimes affects forex volatility spillovers but that adding oil to a forex portfolio decreases the total connectedness of the mixed portfolio. Asymmetries in connectedness are relatively small. While negative shocks dominate forex volatility connectedness, positive shocks prevail when oil and forex markets are assessed jointly. Frequency connectedness is largely driven by uncertainty shocks and to a lesser extent by liquidity shocks, which impact long-term connectedness the most and lead to its dramatic increase during periods of distress.
Czech name
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Czech description
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Classification
Type
Jost - Miscellaneous article in a specialist periodical
CEP classification
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OECD FORD branch
50202 - Applied Economics, Econometrics
Result continuities
Project
GA19-15650S: Central Bank Governance: Transparency and Communication after the Crisis
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2019
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Energy Journal
ISSN
0195-6574
e-ISSN
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Volume of the periodical
40
Issue of the periodical within the volume
Special Issue 2
Country of publishing house
US - UNITED STATES
Number of pages
18
Pages from-to
157-174
UT code for WoS article
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EID of the result in the Scopus database
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Basic information
Result type
Jost - Miscellaneous article in a specialist periodical
OECD FORD
Applied Economics, Econometrics
Year of implementation
2019