Open AccessCrude oil price-exchange rate nexus in Pakistan
Author(s) -
Farhat Iqbal,
Abdul Raziq
Publication year - 2018
Publication title -
financial statistical journal
Language(s) - English
Resource type - Journals
ISSN - 2578-1960
DOI - 10.24294/fsj.v1i2.738
Subject(s) - economics , exchange rate , econometrics , volatility (finance) , oil price , heteroscedasticity , crude oil , monetary economics , financial economics , petroleum engineering , engineering
This paper studies the association between price of crude oil and the Pakistani Rupee-US Dollar exchange. Asymmetric power autoregressive conditional heteroscedastic (APARCH) model is used to measure the influence of oil price on the nominal exchange rate using daily data of extreme oil price volatility (2006 – 2013). This model is found to fit the data well and the results reveal a high degree of volatility persistence and leverage effect in returns. This study also establishes a positive association between currency exchange rate and oil price. These findings provide insight into the transmission link between the global oil market and exchange rate.