Modelling the oil price-exchange rate nexus for South Africa

This paper conducts an empirical analysis of the relationship between oil prices and exchange rates in South Africa. We model the volatility and jumps in exchange rate returns by using the GARCH autoregressive conditional jump intensity model of Chan and Maheu which models the effects of extreme news events (jumps) in returns. The empirical results show that oil price increases lead to a depreciation of the South African rand relative to the US dollar.