Volume : 5, Issue : 9, SEP 2019

IMPACT OF OIL PRICE FLUCTUATION ON FOREX MARKET : AN ANALYSIS

DR. SUDHANSU SEKHAR NAYAK, MR. PRASENJEET SARANGI

Abstract

Oil imports represent a significant fraction of the trade balance for energy-dependent economies. In the case of small open economies with floating exchange rate, the variability in oil prices is expected to have a large impact on the relative value of the currency. This relationship between the price of oil and the exchange rate has been established by the literature for oil- producing countries but not for oil-importing countries.

The foreign exchange market is the market in which currencies are bought and sold against each other. It is the largest market in the world. This paper investigated the long-term relationship between crude oil prices and exchange rate, the sample consists of crude oil prices in India and US Dollar Exchange rate in terms of Indian Rupee, especially real exchange rate. The study used annual data from 2013 to 2017. Descriptive statistics, Unit Root Test, Co- integration Test, Granger Causality Test, GARCH Model used for the study. The study confirmed the presence of normality and stationarity.

The present study analyse the stationary of crude oil prices and exchange rate there is no stationary in the crude oil prices and exchange rate. The study found the role of crude oil prices in the information and price discovery of US Dollar in the Foreign Exchange Market. The study confirmed the presence of normality and stationarity.

Keywords

CRUDE OIL PRICE, OIL PRICE FLUCTUATION, FOREIGN EXCHANGE MARKET.

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