Investigation of the Relations between Crude Oil Prices and Real Effective Exchange Rate (REER) in Iran using Phase-Angle Analysis

Abstract: This paper discusses two topics. At first, it uses continuous wavelet (Morlet) transform, coherency, and phase angle analysis to study the effect of mean volatility in OPEC Crude Oil prices, WTI crude oil prices, Brent Crude oil prices and Iran’s crude oil prices on The Iran’s REER. To this end, the monthly data of the variables for years ۲۰۰۳ to ۲۰۱۲ is used. Coherency analysis revealed areas where there are behavioral similarities between the two time series (The Oils Prices and The Iran’s REER). These areas are displayed in spectral graphs. The results demonstrate that there is high coherency between the two variables (The Oils Prices and The Iran’s REER). Then, to have a better understanding of type and depth of the relations between The Iran’s Oil prices and The Iran’s REER, cross wavelet transform and phase difference analysis are used. The final result demonstrates that if the government does not take countercyclical policies, The Iran’s crude oil price variable has the potential to affect Iran’s REER variable and be the lead operator.

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JEL Classification: B۲۳ , C۲۲ , E۳. Keywords: Coherency , Oil Price , Phase-Angle , REER , time series , Wavelet