Asymmetric adjustment between oil prices and exchange rates: Empirical evidence from major oil producers and consumers

•We investigate a long-run asymmetric adjustment of the oil prices and the exchange rates of twelve major oil producers and consumers.•We use the TAR and M-TAR models to investigate cointegration with asymmetric adjustments between these series.•The results reveal the existence of cointegration in six of the twelve countries studied and co-integration and asymmetric adjustment in four countries.•Brazil, Nigeria and UK show higher adjustment after a positive shock than after a negative shock while the Eurozone shows the opposite behaviour.

This paper investigates the long-run relationship and asymmetric adjustment between the real oil prices and the real bilateral exchange rates of twelve major oil producers and consumers in the world. It uses threshold autoregressive, TAR, and momentum threshold autoregressive, M-TAR models. The data-set used is monthly series that covers 1970:01–2012:01. The results reveal the existence of cointegration in six of the twelve countries studied and cointegration and asymmetric adjustment in four countries of which Brazil, Nigeria and the UK show higher adjustment after a positive shock than after a negative shock while the Eurozone shows the opposite behaviour.