1. Measuring exchange rate volatility, oil price shocks & economic growth
國際金融專題 期末報告
指導教授: 楊奕農
班級: 國貿碩一
學號:
姓名: 許澤妤

2. Outline
Introduction
Methodology
Results
Conclusion

3. Introduction (1/2)
Exchange rate volatility and oil price shocks has received attention from last many era and its importance is certain in all sectors of the economy.
Identify factor affecting exchange rate volatility and the impact of oil prices on economic growth of Taiwan from 1984 to 2014.

4. Introduction (2/2)
Establish a relationship between oil prices and exchange rate with economic growth.
Measure a long run relationship and short run adjustment mechanism in between macroeconomic variables and exchange rate like Exports, Imports, inflation, interest rate, government consumption in Taiwan.
Depreciation in exchange rate transfers income from importing countries to the exporting countries and effects terms of trade.
Government revenue increases due to foreign direct investment (FDI), which leads to government investment in development projects that has a positive impact on the economy.
The impact of oil prices is different for both oil imparting and oil exporting countries.

5. Methodology (1/2) Annual data of variable is taken from 1984 to 2014
Gross domestic product (GDP) is taken in billions
Data of world oil prices is taken in current US$
GDP=β0 + β1 OILPRICES+ β2 REER +μ (1)

6. Methodology (2/2)
Real effective exchange rate (REER) is also checked as an endogenous variable with certain macroeconomic variables
Exchange rate of a country is affected by inflation
Annual data of imports, exports, and government consumption expenditure is taken in US dollars
REER=β0 + β1 EXP+ β2 IMP + β3 IR+ β4 FDI+ β5 GC+ μ (2)

7. Results (1/4) Table 1 Table 2 Lag LogL LR FPE AIC SC HQ -577.1947 NA*
NA*
  9.28e+14*
   *
   *
   * 1  
 1.01e+15       2  
 1.11e+15       3  
 1.95e+15      
Table 1
Variables
Test Specification
ADF Test
Critical Value
Prob DW
GDP
I--1％
0.0001
OILP
0.0000
REER
Table 2

8. Results (2/4)
Variable
Coefficient
Std. Error
t-Statistic
Prob.  
D(OILP)
0.2489
D(REER)
0.6507
UT(-1)
0.3320 C
0.0000
Table 3
GDP= UT (-1) REER OILP (3)

9. Results (3/4) Table 4 Table 5 Variables Test Specification ADF Test
Critical Value
Prob DW
REER
I--1％
0.0000
CPI
0.0023
EXPR
0.0001
GCE
0.0037
IMP IR
0.0012
FDI
0.0002
 Lag
LogL LR
FPE
AIC SC HQ
NA*
  2.63e+51*
   *
   *
   * 1  
 1.33e+52       2  
 1.63e+52      
Table 4
Table 5

10. Results (4/4)
As per trace statistics there exists 4 cointegration equations as shown in the table 6.
Hypothesized
No. of CE(s)
Eigenvalue
Trace
Statistic
0.05
Critical Value
Prob.**
None *      
 0.0000
At most 1 *      
 0.0007
At most 2 *      
 0.0117
At most 3 *      
 0.0383
At most 4      
 0.0952
At most 5      
 0.2824
At most 6      
 0.1334
Table 6

11. Conclusion Rise in oil prices will be affecting positively to GDP
Real effective exchange rate will cause decrease in GDP
Exports, interest rate, and government consumption have positively related to the real exchange rate
Imports, foreign direct investment, and consumer price index have negatively related to the real exchange rate. Consumer price index has significant negatively related to the real exchange rate