Modelling Dependence Structure of Exchange Rate and Energy Price by C-Vine Copula in China

Abstract

© 2020 Published under licence by IOP Publishing Ltd. This study aims to investigate the co-movement between the exchange rate and the different energy prices by using the canonical vine copula approach. China needs to import large amounts of oil, natural gas, and other energy sources every year, thus, the exchange rate plays a vital role in the energy market import in China. This study uses C-vine copula to estimate the interdependence between the exchange rate and the different energy prices including gasoline price, coal price, and liquified natural gas price. The result shows that the exchange rate has a positive dependency effect on all energy prices, especially the highest degree of interdependence between the exchange rate and gasoline prices.