Dynamic Conditional Correlation between Oil Price and Exchange Rate in Iran with Long Memory and asymmetry (MULTIVRIATE FIEGARCH-DCCAPPROACH)

Articles in Press

Document Type : Research Paper

Authors

1 Member of the Faculty of Economics and Management of Tabriz University

2 PhD student at the Faculty of Economics and Management, University of Tabriz

3 Faculty member, Faculty of Economics and Management, University of Tabriz

10.22034/ecoj.2026.65359.3390

Abstract

Abstract

Evaluating correlation between financial assets is one of the fundamental issues in investment analysis and risk management. Investors who try to diversify their portfolios in order to avoid risk pay special attention to the connections between markets. In recent years, the existence of long-term memory in Iranian financial markets has occupied an important part of time series analysis. Empirical evidence shows that negative and positive shocks do not have the same effect on the fluctuations of time series of financial variables. In this study, the dynamic conditional correlation between foreign exchange markets and oil prices is examined with an emphasis on the effect of long-term memory and the asymmetry of their effectiveness. For this purpose, daily data on oil prices and common currencies of the dollar, euro, yuan and lira in the period from 2/5/1393 to 24/1/1402 have been used. The results of the data analysis using FIEGARCH-DCC indicate the existence of a negative and meaningless conditional correlation between oil prices and the dollar rate, and the existence of a positive and significant conditional correlation between oil prices and the euro rate. In foreign exchange transactions, except for the relationship between the dollar and the yuan and the euro and the yuan, the remaining relationships between currencies are positive and significant. The existence of long-term memory in the time series under study is also confirmed.

Keywords: Dynamic conditional correlation, foreign exchange market, long-term memory, FIEGARCH

J

Keywords

Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 08 February 2026

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