The lead lag relationship between oil prices and exchange rate in an oil importing country: evidence fromThailand using ARDL

Tayeb, Hamza and Masih, Mansur (2018): The lead lag relationship between oil prices and exchange rate in an oil importing country: evidence fromThailand using ARDL.

Abstract

The purpose of this study is to explore the Granger-causal relationship between oil prices, exchange rates and inflation rates using Thailand as a case study. Discerning this relationship will help us understand the mechanics of the Thai economy and the factors contributing to its development. Standard time-series and ARDL methods were used to investigate this relation. The reason for choosing to apply both methods is that ARDL is a more robust technique than the standard time series technique. Also, ARDL helped us overcome a problem regarding the variables used in the study as we had a mix of I(0) and I(1) variables which is unacceptable under the standard time-series technique when cointegration of the variables is examined. Our empirical findings tend to indicate that there is a long run relationship existing between these variables and that the exchange rate appears to be the variable leading oil prices and inflation at least in the context of Thailand during the period under review. The results are reasonable and have strong policy implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil Price, Exchange Rate, Inflation, Thailand, cointegration, exogeneity, endogeneity
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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