Oil Price and Exchange Rate Relationship for ASEAN-5 Countries: A Panel Study Approach

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1st International Conference on Economics, Finance and Management Outlooks 20-21 December, 2013 Pearl International Hotel, Kuala Lumpur, Malaysia

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Abstract of Economics, Finance and Management Outlooks, 2013, Vol.1
DOI: 10.18488/journal.1003/2013.1/1003.1
1st International Conference on Economics, Finance
and Management Outlooks
20-21 December, 2013
Pearl International Hotel, Kuala Lumpur, Malaysia
Conference Website: www.pakrdw.com
11
Oil Price and Exchange Rate Relationship for ASEAN-5
Countries: A Panel Study Approach
Mukhriz Izraf Azman Aziz1
--- Jauhari Dahalan2
---Lukman Hakim3
1,2
Universiti Utara Malaysia
3
Universitas Sebelas Merat, Indonesia
Abstract
The goal of this paper is to estimate the long run effects of real oil price and real
interest rate differential on real exchange rate for a monthly panel of ASEAN-5
countries from 1983 to 2012. The modeling exercise begins with the determination of
the stationarity condition of the variables which are found to be integrated of order one.
Using several panel cointegration tests, the paper finds evidence of cointegration
among the three variables. Finally, using pooled mean group estimator, the paper finds
a negative and statistically significant impact of real oil price on real exchange rate for
ASEAN-5 countries, implying that increase in real oil price leads to real exchange rate
appreciation.
Keywords: Oil price, Exchange rate, Cointegration.

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