GCC Countries and the Nexus between Exchange Rate and Oil Price: What wavelet decomposition reveals?

Bouoiyour, Jamal and Selmi, Refk (2014): GCC Countries and the Nexus between Exchange Rate and Oil Price: What wavelet decomposition reveals? Forthcoming in: International Journal of Computational Economics and Econometrics

Abstract

We employ wavelet decomposition and nonlinear causality test to investigate the nexus between the real oil price and the real effective exchange rate in three GCC countries : Qatar, Saudi Arabia and UAE. We find strong evidence in favor of a feedback hypothesis in Qatar and UAE and of a neutrality hypothesis in Saudi Arabia. The first observation outcome means that Qatar and UAE should reinforce the downward effect of oil price on real exchange rate by improving diversification policy. The second one implies that the behavior of Saudi Arabia as a price maker may allows it to maintain a quick recovery under oil shocks.

• Item Type: MPRA Paper
• Language: English
• Keywords: real oil price, real effective exchange rate, wavelets, nonlinear causality.
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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