Abstract
The study aims to investigate the impact of oil shocks on real exchange rates of ten Southeast Asian countries from 2005 to 2017. The results of the linear model show that only five out of ten countries the study has found the impact of the oil price shock on real exchange rates, but there is no evidence that supply shocks and aggregate demand shocks affect exchange rates in all these countries. However, the results of the Markov-switching model reveal that the supply shocks have same side impacts on some oil-exporting countries (Indonesia and Vietnam) and adverse impacts on oil-importing countries (Singapore, Thailand, Cambodia), while aggregate demand shocks only affect Indonesia, Brunei and Laos. It is also noted that oil price shocks have strong and persistent impacts on exchange rates in oil-exporting countries (except Vietnam). Additionally, the study results indicates evidences that support the presence of regime switching in oil-importing countries, namely Singapore and the Philippines.
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