The Nexus Between Oil Price Shock and the Exchange Rate in Bangladesh

Authors

  • Sakib Bin Amin Associate Professor, North South University, Dhaka, Bangladesh
  • Noshin Nawal Audry BSc Student of Economics, North South University
  • Ahmed Farah Ulfat BSc Student of Economics, North South University

Abstract

We examine the nexus between oil price and exchange rate for Bangladesh economy by using annual data covering from 1980 to 2018. Given the stationarity properties, the Johansen cointegration and the ARDL bounds cointegration tests find a long-run cointegrating relationship between the variables. We find that oil price granger causes exchange rate in the long-run but not in the short-run. According to DOLS and DARDL model, an increase in oil price appreciates exchange rate by 0.40% and 0.30%. We argue that the central bank's proper monitoring mechanism is necessary to avoid oil price's adverse effects on the exchange rate.Keywords: Oil Price Shock, Real Exchange Rate (RER), Cointegration, Causality, DOLS, DARDL, Bangladesh.JEL Classifications: C22, Q43DOI: https://doi.org/10.32479/ijeep.10658

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Published

2021-02-01

How to Cite

Amin, S. B., Audry, N. N., & Ulfat, A. F. (2021). The Nexus Between Oil Price Shock and the Exchange Rate in Bangladesh. International Journal of Energy Economics and Policy, 11(2), 427–435. Retrieved from https://econjournals.com./index.php/ijeep/article/view/10658

Issue

Vol. 11 No. 2 (2021)

Section

Articles

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