Do demand and supply shocks in the global crude oil market exhibit asymmetric effects on exchange rates in 13 Asian economies?

Abstract

ABSTRACT This article investigates whether there are asymmetric effects of oil supply, aggregate demand, and oil-specific demand shocks on exchange rates in 13 Asian economies. We also take into consideration the impact of uncertainty in world trade policy. We provide compelling evidence that supports the presence of long-term asymmetry in at least one of the oil supply and oil demand shocks for the currencies of selected Asian economies. However, we do not find any evidence of short-term asymmetry effects for any of the three oil shocks. Hence, the observed asymmetries in oil supply and demand shocks are considered a phenomenon that occurs over the long term for Asian currencies. Lastly, our findings emphasize the significant role of uncertainty in world trade policy in explaining both long-term and short-term fluctuations in Asian currencies.