Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/201982
Authors: 
Baruník, Jozef
Kocenda, Evžen
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7756
Abstract: 
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.
Subjects: 
crude oil
forex market
volatility
connectedness
spillovers
semivariance
asymmetric effects
frequency connectedness
JEL: 
C18
C58
F31
G15
O13
Q31
Q43
Document Type: 
Working Paper

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