scholarly journals Exchange rates and oil price under uncertainty and regime switching: A Markov-switching VAR approach

2021 ◽  
Vol 13 (2) ◽  
pp. 200-215
Author(s):  
Nagmi Moftah Aimer ◽  
Abdulmula Albashir Lusta
Keyword(s):  
Exchange Rates ◽  
Regime Switching ◽  
Markov Switching ◽  
Oil Price

scholarly journals Identifying structural changes in the exchange rates of South Africa as a regime-switching process

2020 ◽  
Author(s):  
Katleho Makatjane ◽  
Roscoe van Wyk
Keyword(s):  
Machine Learning ◽  
South Africa ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Regime Switching ◽  
Structural Changes ◽  
Markov Switching ◽  
Exchange Rate Volatility ◽  
Learning Approach ◽  
Machine Learning Approach

Exchange rate volatility is said to exemplify the economic health of a country. Exchange rate break points (known as structural breaks) have a momentous impact on the macroeconomy of a country. Nonetheless, this country study makes use of both unsupervised and supervised machine learning algorithms to classify structural changes as regime shifts in real exchange rates in South Africa. Weekly data for the period January 2003–June 2020 are used. To these data we apply both non-linear principal component analysis and Markov-switching generalized autoregressive conditional heteroscedasticity. The former approach is used to reduce the dimensionality of the data using an orthogonal linear transformation by preserving the statistical variance of the data, with the proviso that a new trait is non-linearly independent, and it identifies the number of regime switches that are to be used in the Markov-switching model. The latter is used to partition the variance in each regime by allowing an estimation of multiple break transitions. The transition breakpoints estimates derived from this machine learning approach produce results that are comparable to other methods on similar system sizes. Application of these methods shows that the machine learning approach can also be employed to identify structural changes as a regime-switching process. During times of financial crisis, the growing concern over exchange rate volatility, including its adverse effects on employment and growth, broadens the debates on exchange rate policies. Our results should help the South African monetary policy committee to anticipate when exchange rates will pick up and be prepared for the effects of periods of high exchange rates.

Dynamics of a stochastic susceptible-infective-recovered (SIRS) epidemic model with vaccination and nonlinear incidence under regime switching and Lévy jumps

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Junna Hu ◽  
Buyu Wen ◽  
Ting Zeng ◽  
Zhidong Teng
Keyword(s):  
Epidemic Model ◽  
Regime Switching ◽  
Markov Switching ◽  
Threshold Value ◽  
Open Problems ◽  
Nonlinear Incidence ◽  
Sirs Epidemic Model ◽  
Stochastic Epidemic ◽  
Lévy Jumps ◽  
White Noises

Abstract In this paper, a stochastic susceptible-infective-recovered (SIRS) epidemic model with vaccination, nonlinear incidence and white noises under regime switching and Lévy jumps is investigated. A new threshold value is determined. Some basic assumptions with regard to nonlinear incidence, white noises, Markov switching and Lévy jumps are introduced. The threshold conditions to guarantee the extinction and permanence in the mean of the disease with probability one and the existence of unique ergodic stationary distribution for the model are established. Some new techniques to deal with the Markov switching, Lévy jumps, nonlinear incidence and vaccination for the stochastic epidemic models are proposed. Lastly, the numerical simulations not only illustrate the main results given in this paper, but also suggest some interesting open problems.

Dependence structure between money and economic activity: A Markov-switching copula VEC approach

2021 ◽  
pp. 1-17
Author(s):  
Apostolos Serletis ◽  
Libo Xu
Keyword(s):  
Error Correction ◽  
Economic Activity ◽  
Regime Switching ◽  
Markov Switching ◽  
Tail Dependence ◽  
Error Correction Model ◽  
Dependence Structure ◽  
Copula Models ◽  
Correction Model ◽  
Dependence Structures

Abstract This paper examines correlation and dependence structures between money and the level of economic activity in the USA in the context of a Markov-switching copula vector error correction model. We use the error correction model to focus on the short-run dynamics between money and output while accounting for their long-run equilibrium relationship. We use the Markov regime-switching model to account for instabilities in the relationship between money and output, and also consider different copula models with different dependence structures to investigate (upper and lower) tail dependence.

scholarly journals The Regime-Switching Behaviour of Exchange Rates and Frontier Stock Market Prices in Sub-Saharan Africa

2021 ◽  
Vol 14 (3) ◽  
pp. 122
Author(s):  
Maud Korley ◽  
Evangelos Giouvris
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Regime Switching ◽  
Markov Switching ◽  
Sub Saharan Africa ◽  
Var Model ◽  
High Volatility ◽  
Sub Saharan ◽  
The Relationship ◽  
Fx Market

Frontier markets have become increasingly investible, providing diversification opportunities; however, there is very little research (with conflicting results) on the relationship between Foreign Exchange (FX) and frontier stock markets. Understanding this relationship is important for both international investor and policymakers. The Markov-switching Vector Auto Regressive (VAR) model is used to examine the relationship between FX and frontier stock markets. There are two distinct regimes in both the frontier stock market and the FX market: a low-volatility and a high-volatility regime. In contrast with emerging markets characterised by “high volatility/low return”, frontier stock markets provide high (positive) returns in the high-volatility regime. The high-volatility regime is less persistent than the low-volatility regime, contrary to conventional wisdom. The Markov Switching VAR model indicates that the relationship between the FX market and the stock market is regime-dependent. Changes in the stock market have a significant impact on the FX market during both normal (calm) and crisis (turbulent) periods. However, the reverse effect is weak or nonexistent. The stock-oriented model is the prevalent model for Sub-Saharan African (SSA) countries. Irrespective of the regime, there is no relationship between the stock market and the FX market in Cote d’Ivoire. Our results are robust in model selection and degree of comovement.

scholarly journals PENGARUH NILAI TUKAR DAN HARGA MINYAK MENTAH DUNIA TERHADAP RETURN SAHAM PT. INDOMOBIL SUKSES INTERNASIONAL TBK. DAN PT. ASTRA INTERNASIONAL TBK. TAHUN 2006-2016

2017 ◽  
Vol 1 (2) ◽  
pp. 61
Author(s):  
Arif Fadlilah ◽  
Sri Hermuningsih
Keyword(s):  
Exchange Rates ◽  
Crude Oil ◽  
Stock Prices ◽  
Stock Return ◽  
T Test ◽  
Oil Price ◽  
Crude Oils ◽  
Crude Oil Price ◽  
F Test ◽  
Crude Oil Prices

This research is meant to find out the influence of exchange rates and crude oil price either simultaneous or partial to the stock return at PT. Indomobil Sukses Internasional Tbk. and PT Astra Internasional Tbk. The data which is applied in this research is the automotive companies’ stock prices, Rupiah exchange rates, and crude oil price from 2006 to 2016. The multiple linear regressions are applied as the analysis technique by carrying out F test and t test. Based on the F test it is found that simultaneously the rupiah exchange rates and crude oil prices have influence to the stock return. Based on the t test it is found that partially the rupiah exchange rates have no influence to PT. Indomobil Sukses Internasional Tbk stock return but have influence to PT. Astra Internasional Tbk stock return and crude oils prices have influence to stock return. t test indicates the dominant influence to the stock return PT. Indomobil Sukses International Tbk is crude oils variable and stock return PT. Astra International Tbk is exchange rates variable

PALM OIL PRICE–EXCHANGE RATE NEXUS IN INDONESIA AND MALAYSIA

2021 ◽  
Vol 24 (2) ◽  
pp. 169-180
Author(s):  
Afees Salisu ◽  
Abdulsalam Abidemi Sikiru
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Palm Oil ◽  
Commodity Prices ◽  
Oil Price ◽  
Future Research ◽  
Daily Data ◽  
Out Of Sample ◽  
Exchange Rate Movements ◽  
Predictive Content

In this study, we extend the literature analyzing the predictive content of commodity prices for exchange rates by examining the role of palm oil price. Our analysis focuses on Indonesia and Malaysia, the two top producers and exporters of palm oil, and utilizes daily data covering the period from December 12, 2011 to March 29, 2021, which is partitioned into two sub-samples based on the COVID-19 pandemic. Relying on a methodology that accommodates some salient features of the variables of interest, we find that on average the in-sample predictability of palm oil price for exchange rate movements is stronger for Indonesia than for Malaysia. While Indonesia’s exchange rate appreciates due to a rise in palm oil price regardless of the choice of predictive model, Malaysia’s exchange rate only appreciates after adjusting for oil price. However, both exchange rates do not seem to be resilient to the COVID-19 pandemic as they depreciate amidst dwindling palm oil price. Similar outcomes are observed for the out-of-sample predictability analysis. We highlight avenues for future research and the implications of our results for portfolio diversification strategies.

On the asymmetric response of the exchange rate to shocks in the crude oil market

2020 ◽  
Vol 14 (4) ◽  
pp. 839-852 ◽  
Author(s):  
Huthaifa Alqaralleh
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Financial Crises ◽  
Oil Price ◽  
Series Data ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Exchange Rate ◽  
Asymmetric Cointegration

Purpose This paper aims to investigate the nonlinear dynamics in the effects of oil price shocks on the exchange rate for a sample from the Group of Twenty (G20) over the period 1994:1-2019:1. Design/methodology/approach Using monthly time series data covering the period1994:1-2019:1, the author first use the non-parametric triples test of Randles et al. (1980) to ascertain the existence of asymmetric properties in the sample of exchange rates. Then the author used the nonlinear ARDL cointegration approach developed by Shin et al. (2014) to examine the reaction of these exchange rates to the oil price shocks. Findings This study has identified significant evidence that the exchange rate is asymmetrically distributed, with the effect that high appreciation of the exchange rate is followed by slower depreciation. The NARDL results support such asymmetry even more strongly because in the test the exchange rate is shown to react differently in the long term to positive and negative shocks in oil prices. Another major finding was that the speed of adjustment differed over the sample, as the cumulative dynamic multipliers effect highlighted. Research limitations/implications This change in direction and the employment of non-linear technique can be to obtain better insight into the model specification, which the author believes, will not only enhance the findings in the literature but also enhance forecasting and decision-making. Practical implications A practical implication of this change is the possibility that policymakers and participants concerned with exchange rate stability should intervene in the market to alleviate the unfavourable impact of oil price shocks on the exchange rate. Originality/value Addressing this nonlinear dynamic in the effects of oil price shocks on the exchange rate have at least the following two important reasons: asymmetry and regime change are types of nonlinearities that affect the market dynamics, especially, over marked sample period with such financial crises as the global financial crises of 2007, thereby violating the linear models. Adopting an asymmetric cointegration technique permits to incorporate cointegrated positive and negative components of the considered series.

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