Measurement of variables used
The variable8 that were used8in analyzing the correlation8includes the crude oil8prices, monthly average8exchange rate of Indian rupee, and th9monthly average9exchange rate of9US dollar which we computed9using indirect9quotation.
Monthly Spot Crude Oil Price The data on the monthly spot crude oil prices were obtained from Indian oil corporation website from a2006 to 2013. This was converted into natural log to determine the monthly percentage change.Figure
LOG CRUDE OIL
0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 LOG CRUDE OIL
Monthly Average Exchange Rate of the US dollar to Rupee
The data on the monthly average exchange rate of naira was use to calculate the average exchange rate of the USD indirectly using the Rupee as a base. The data was later converted into natural log and used as a dependent variable to test regression
.08 0.against the oil price within the same sample size before testing for two other subsamples.
0.06 0.04 -0.04 0.02 LOG (USD/NGN) 0 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 -0.02 -0.
512307284 -0.00246335 0. The standard deviation of the crude oil is much higher than that of the exchange rate which suggests that degree of variability of that of the crude oil is higher than that of the exchange rate.007989367 3.557762885 0.006066543 0.009931473 0.430681522 0.063317662 0.33690617 0. this suggests we have more of increase than decrease in the changes in both of the variables.042837089 0.Analysis summary
LOG CRUDE OIL Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count 0.020977923 #N/A 0.175401114 0.544008367 0. The returns of the crude oil is negatively skewed which suggests that the majority of the distribution is concentrated to the right.089383256 0.190095055 81
In the descriptive statistics table above which shows the characteristics of the full sample data set.491389984 81
LOG (USD/NGN) Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count 0.000761518 #N/A 0.022170147 0.000491515 0. which means the dispersion the data points of the exchange is closer to its mean.002346853 0. which means the low
.106154752 0.53368503 1. we see the mean of both the returns on crude oil and USD/NGN exchange rate are both positive.
197115542 -0.152904 0.3 -0.
Monthly percentage change in crude oil and exchange rate 1996-2013
0.182441037 1 -0.216395 0.4 1 5 9 131721252933374145495357616569737781 LOG CRUDE OIL LOG (USD/INR)
In this section.3 0. we present the results of the statistics of the overall sample size: 2006-13 and the subsamples of 2011-13. The Crude oil returns has a higher excess kurtosis than the exchange rate which suggests that more of the crude oil variance might be as a result of infrequent high deviations.2 0. whereas the returns of the exchange rate is positively skewed which suggests that the majority of the distribution will be to the left.1 -0.2 -0.1 0 -0.395081233 1
2006-13 CRUDE PRICE (USD/INR) LOG (USD/INR) LOG CRUDE OIL
CRUDE PRICE 1 0. and the high values in this distribution are relatively few.150503
LOG CRUDE OIL
1 0. 2006-11.values in the distribution are relatively few.
. this relation was negative 39%. this suggests a change in the direction of the relation in this time period.226406 -0.2452431 -0.05882618 -0. it went to almost negative 51%. the rate of change of the crude oil and that of the USD/NGN was about negative 39% in the 2006 to 2011 sub-sample period.
For the full sample period. However.389621261 1 0.210019
LOG CRUDE OIL
1 -0.079362396 1 -0. For the full sample period. the correlation between the raw price of crude oil and the raw USD/INR exchange was about 15%.518021021 1
2006-11 CRUDE PRICE (USD/INR) LOG (USD/INR) LOG CRUDE OIL
CRUDE PRICE 1 0. it was about 22%.50917 0. in the 2011-2013 sub-sample periods.24561 0.2011-13 CRUDE PRICE (USD/INR) LOG (USD/INR) LOG CRUDE OIL
CRUDE PRICE 1 -0. the correlation was about 15% while in the 2011.150359132 1
The correlation results threw up some interesting findings.39836 -0.2013 sub-sample period. while in the 2006 to 2011 sub-sample.486603
LOG CRUDE OIL
There are some important statistics generated by this.. and run a linear regression to achieve a line of best fit.116624 0.595 72 F 3. denoting that there is a Negative relationship between movements in oil prices and movements in the value of the USD-INR.7724 28 0.061 Regression 1 31 291.06632 ce F 22 3. In order to investigate the matter further. SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observatio ns ANOVA Significan df SS 55. I decided to plot the data and run a regression.91 Residual Total 20 21 45 346.The figure is exceptionally high.820435 0.398358 0. We have modeled the relationship between oil price and the USD-INR exchange rate as a linear one.97 MS 55.158689
.The correlation for 2011-13 is -0.061 31 14.39 .
26x Since the exchange rate is on the y axis and oil prices are on the x axis. It is the square of the correlation coefficient between the dependent variable.75 97
One of the most important is R2.26 indicates the relationship between changes in oil prices and changes in the exchange rate.0% 48.48E05 48.0197 52 Upper 95.9422 7 0.2975 21 CRUDE PRICE -0.
. We’ve estimated the following linear relationship between the exchange rate and oil prices: y = 0.611 55 0. meaning that 15 % of the variance in the USD-INR is explained by the variance in oil prices.0% 111.55372 0. Here R square is 0. Here it means that whenever oil prices go up a dollar. the Indian rupee loose 26 paisa on the U.58 Coefficie nts Standa rd Error t Stat 15.1374 61 1.26 Oil Prices We can interpret numerical figures as follows: -o.S.136 Intercept 80.1856 44 5. one.75 97 Lower 95.0663 2 -0.26699 0.80 -0.61155 Lower 95% Upper 95% 111. this gives us the relationship: Exchange Rate = 0.5537 2 0.0197 52 P-value 3.80 – 0.15.