Sissoko Publishes “Crude Oil Prices and Exchange Rates: Causality, Variance Decomposition and Impulse Response”

Posted on 2/11/2015 11:10:32 AM

Yaya Sissoko’s article “Crude Oil Prices and Exchange Rates: Causality, Variance Decomposition and Impulse Response,” co-authored with Jui-Chi Huang from Penn University State Berks and Tantatape Brahmasrene from Purdue University North Central, has been accepted for publication in Energy Economics,  Volume 44, July 2014.

This paper examines the short-run and long-run dynamic relationship between the U.S. imported crude oil prices and exchange rates, using monthly data from 1996 to 2009. The empirical results indicate that the exchange rates Granger-caused crude oil prices in the short run, while the crude oil prices Granger-caused the exchange rates in the long run. Exchange rate shock has a significant negative impact on crude oil prices, while the impulse response of the exchange rate variable to a crude oil price shock was statistically insignificant. Finally, the impact of extreme price volatility in June 2008 on exchange rates was significant. When world oil prices are stabilized, currency fluctuations and uncertainty can be minimized.

Department of Economics