Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets

0517561 - ÚTIA 2020 RIV US eng J - Journal Article
Baruník, Jozef - Kočenda, E.
Total, Asymmetric and Frequency Connectedness between Oil and Forex Markets.
Energy Journal. Roč. 40, Special Issue 2 (2019), s. 157-174, č. článku 3233. ISSN 0195-6574. E-ISSN 1944-9089
Grant - others:GA ČR(CZ) GA19-15650S
Institutional support: RVO:67985556
Keywords : Crude oil * Forex market * Volatility * Connectedness * Spillovers * Semivariance * Asymmetric effects * Frequency connectedness
OECD category: Applied Economics, Econometrics
Impact factor: 2.394, year: 2019
Method of publishing: Limited access
http://library.utia.cas.cz/separaty/2019/E/barunik-0517561.pdf https://www.iaee.org/energyjournal/article/3233

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.
Permanent Link: http://hdl.handle.net/11104/0302891