Causality Relationships Between Oil and Foreign Exchange Markets An Application With Wavelet Analysis

Abstract

Relationships among financial and commodity markets become dynamic through globalization and increasing market integration. It is undeniably accepted that fluctuations in financial markets drag real economies into crisis and cause socio-economic changes in countries. In this context, examining the temporal variations of causality relations in commodity and financial markets has become crucial for investors and policy makers, as it provides useful insights in terms of understanding the nature of the inter-market information flows and the spillover effect of shocks. Thus, the main purpose of this study is to reveal the time-based and scale based causality information flow between Oil prices and Euro exchange rate, and to reveal the global and local events affecting these information flows through the empirical approach proposing the use of SHP and CWTC tests. Through using the CWTC (Continuous Wavelet Transformation Based Granger Causality Test) and SPH, which allow for the analysis of non-stationary data directly, evidence that the causality between the Euro exchange rate and oil prices varies over time and has dynamics varying based on the time scale is found in this study. The overall result of the aformentioned tests indicates that there exist both unidirectional causalities from EUR to OIL in the period of 2010 - 2015, and bidirectional causality in the period of 2015 – 2020. Moreoever, evidence in favor of short-term bidirectional causality relationship patterns between EUR and OIL and long term unidirectional information flow from EUR to OIL were provided in this study.

Keywords

• Causality Test
• Nonstationary Data Analysis
• Wavelet Analysis
• LA-VAR

Petrol ve Döviz Piyasaları Arasındaki Nedensellik İlişkileri: Dalgacık (Wavelet) Analizi ile Bir Uygulama

Abstract

Küreselleşme ve piyasalar arası artan entegrasyon neticesinde finansal piyasalar ve emtia piyasaları arasındaki ilişki dinamik bir hale gelmiştir. Emtia ve finans piyasalarındaki nedensellik ilişkilerinin zamana bağlı değişiminin incelenmesi, piyasalar arası bilgi akışı ve şokların yayılma etkisinin doğasının anlaşılması açısından yararlı bilgiler sunması nedeniyle yatırımcı ve politika yapıcılar için zorunluluk halini almıştır. Bu çalışmanın ana amacı, SHP ve CWTC testlerinin kullanılmasını öngören ampirik yaklaşım aracılığıyla Petrol fiyatları ve Avro döviz kuru arasındaki zamana dayalı nedensellik etkisinin zamana ve zaman skalasına göre değişiminin ortaya çıkarılması ve söz konusu değişimlerin oluştuğu dönemlerde meydana gelen küresel ve yerel olayların ortaya konulmasıdır. Durağan olmayan verilerin analizine izin veren CWTC (Continuous Wavelet Transformantion Based Granger Casuality Test) ve SHP (Shi – Hurn – Phillips (2020) test) testlerinin uygulanması sonucunda, Avro döviz kuru ve petrol fiyatları arasındaki nedenselliğin zamana bağlı değiştiği ve zaman skalasına göre değişen dinamiklere sahip olduğuna ilişkin kanıtlar bulunmuştur. Söz konusu testlerin ortak sonucu 2010 – 2015 döneminde EUR’den OIL’e tek yönlü nedensellik, 2015 – 2020 döneminde ise çift yönlü nedensellik örüntüsüne dair kanıtlar elde edilmiştir. Ayrıca çalışma sonuçlarına göre EUR ve OIL arasında kısa dönemde kısa süreli meydana gelen çift yönlü nedensellik ilişkisi ve örüntüsünden bahsedilebilir. Uzun dönemde ise EUR’den OIL’e tek yönlü nedensellik ilişkisine dair bulgular sağlanmıştır.

Keywords

• Nedensellik testi
• Durağan Olmayan Veri Analizi
• Dalgacık Analizi
• LA-VAR

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