Exchange rate and oil price pass-through in the BRICS countries: Evidence from the spillover index and rolling-sample analysis

Balcilar M., USMAN O.

Energy, cilt.229, 2021 (SCI-Expanded) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 229
  • Basım Tarihi: 2021
  • Doi Numarası: 10.1016/j.energy.2021.120666
  • Dergi Adı: Energy
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, PASCAL, Aerospace Database, Applied Science & Technology Source, Aquatic Science & Fisheries Abstracts (ASFA), CAB Abstracts, Communication Abstracts, Computer & Applied Sciences, Environment Index, INSPEC, Metadex, Pollution Abstracts, Public Affairs Index, Veterinary Science Database, Civil Engineering Abstracts
  • Anahtar Kelimeler: Diebold-Yilmaz spillover index, Exchange rate, Inflation, Oil price, Pass-through
  • İstanbul Ticaret Üniversitesi Adresli: Evet

Özet

This paper offers new evidence on the exchange rate and oil price pass-through in the BRICS countries through the analysis of the Diebold-Yilmaz spillover index and rolling-windows. Using the monthly frequency data from 1999:M01-2019:M11, our results provide the following findings: (i) there is strong evidence of directional spillovers across the countries; (ii) the total spillovers are low- with Russia (China) having the highest (lowest). This suggests a low pass-through across the countries; (iii) the net spillovers of oil price and exchange rate are positive in Brazil, Russia, and South Africa, while in India, they are both negative. Our results further suggest that - the net spillovers of inflation and output growth are positive in India, while in China, the net spillover of inflation is negative - with oil price and output growth - having positive net spillovers-. The positive (negative) net spillover indicates that a variable contributes to the forecast error variance decomposition of other variables more(less) than what it receives from other variables; (iv) the historical events and crises interrupt the extent of spillovers across the countries, and; (v) the spillovers exhibit significant bursts with no clear-cut evidence of trends across these countries. These findings are useful in formulating an optimal monetary policy.