Oil Importers

JEL classification: F65 G11 Keywords: Stock market returns Oil prices Volatility spillover Portfolio Hedge ratio A B S T R A C T In this study the volatility spillover between stock market returns (Shanghai stock exchange, Nikkei stock exchange and Bombay stock exchange) and crude oil returns in the top three Asian oil-importing countries are investigated. BEKK-GARCH, DCC-GARCH, cDCC-GARCH and GO-GARCH estimation techniques are applied using daily data from 1st January 2000 to December 27th, 2016. Further, these estimation results are used to analyze the optimal portfolio weights and hedge ratios for oil-stock portfolios. The findings reveal that shocks dependence and conditional volatility in its own market have more important role than volatility spillover. Also, the bidirectional spillover is confirmed between Nikkei stock return and oil returns. The unidirectional spillover from Indian stock returns to oil returns. There is, however, no evidence of volatility spillover in case of China. According to optimal portfolio weights and hedge ratios, the oil assets are useful instrument to minimize the portfolio risk in studied markets. The investors, however, should choose more stocks than oil assets to form an optimal portfolio. We also notice that the cDCC-GARCH model is better for risk minimization.

Unlike Russia's exclusion from the SWIFT bank payment system, an EU oil embargo would involve a physical obstacle the Kremlin couldn't easily circumvent. While Russia may have a Plan B in case its banks can no longer use SWIFT, the country cannot redirect its oil trade routes overnight because it relies largely on pipelines to the West. In addition, the EU doesn't depend on Russian oil to the degree many assume. Being fungible, Russian crude could be replaced with oil delivered via tankers and other means from elsewhere. To be sure, Russia could find ways to export its oil elsewhere. Yet, for at least awhile, Moscow would encounter enormous logistic, infrastructure, legal, and financial challenges delivering sufficiently large amounts of oil to non-European customers.

Foreign exchange reserves received considerable attention among the developing economies with the opening up of these economies after 1991 new economic reforms. The importance of managing the foreign exchange reserves gathered momentum over the years due to increase in capital inflows in the form of investments, expanding trade activities and external commercial borrowings (ECBs). According to International Monetary Fund (Balance of Payments Manual, and Guidelines on Foreign Exchange Reserve Management, 2001), which defines reserves as “external assets that are readily available to and controlled by monetary authorities for direct financing of external payments imbalances, for indirectly regulating the magnitudes of such imbalances through intervention in exchange markets to affect the currency exchange rate, and/or for other purposes” (Bhakri and Verma, 2020). Foreign exchange reserves (FER) are also maintained in order to meet uncertainties in a country. It is regulated and managed by the various countries’ central banks. The current paper has focused on the trends in various macroeconomic indicators of foreign exchange reserves in India. The  paper has emphasized on the analysis of four policy periods namely, Liberalization, Globalization, World Recovery and Global financial crises and their impact on foreign exchange reserves. It will be using semi log growth equation model with dummy variables to find out the growth rates in various macroeconomic indicators for different policy periods (Bhakri and Verma, 2020). The ten variables namely, total exports, oil import, food import, other import, total imports, inflow of foreign direct investment, external commercial borrowings, total external debt, short term foreign external debt( as a % of total debt) and debt repayments, are being considered for the analysis.