Risk Spillovers Between Emerging Market Exchange Rates A Nd Crude Oil Prices

From the perspective of bidirectional risk,this paper discusses the risk spillover effect between the exchange rate of emerging market countries and the price of crude oil.The daily data of Brent crude oil price and the exchange rate of 11 emerging market countries including Brazil,India and China are selected as the research variables.It not only considers the intrinsic correlation between exchange rate and oil price,but also investigates the dynamic dependency structure.Firstly,this paper analyzes the intrinsic correlation between the oil price and the exchange rate by using the wavelet analysis method.Secondly,the time-varying Copula function is constructed and the time-varying t Copula model is used to analyze the dynamic dependency relationship.Finally,based on the optimal time-varying Copula model,the dynamic VaR and Co VaR of variables are calculated in this paper,and dynamic ΔCoVaR and%ΔCoVaR are adopted to measure the risk spillover of exchange rate under the fluctuation of crude oil price and that of crude oil price under the fluctuation of exchange rate,so as to further explore the asymmetry characteristics of bidirectional risk spillover.According to the empirical research,the following conclusions are drawn:(ⅰ)The overall fluctuation range of oil price is stronger than that of the exchange rate of most countries.At the same time,the crude oil price and exchange rate have a common fluctuation in different time-frequency domain,which is coherent,and the variables show different lead-lag relations in different time periods.(ⅱ)There is a strong positive correlation between the oil price and the exchange rate of emerging market countries,that is,the rise of oil price is accompanied by the appreciation of the currencies of emerging market countries against the US dollar,but it shows a weak negative correlation in some time periods.In addition,during the period of the rise and fall of the crude oil price,the dynamic dependence between the crude oil price and the exchange rate of each country increased significantly.(ⅲ)Without considering the risk spillover caused by extreme losses in other markets,the fluctuation of crude oil price produces extreme risk spillover on the exchange rate of different countries,but the fluctuation state and degree of the spillover are different.(ⅳ)The risk spillovers from exchange rates to the Brent crude oil price moved in much the same way,without taking into account the risk spillover from extreme losses in other markets.(ⅴ)The risk spillover intensity caused by the crude oil price to the exchange rate is different from that caused by the exchange rate fluctuation to the oil price,that is,there is asymmetric risk spillover,and the volatility intensity and dominant direction of the risk are different.To some extent,the study is conducive to the reasonable adjustment of monetary policies in emerging market countries and the formulation of effective measures by risk management departments to cope with the occurrence of extreme risks,so as to effectively avoid risks.For investors,the study is helpful for them to construct appropriate investment portfolio according to the changes of international economic environment to avoid the risks of foreign exchange market and oil market.