SPECTRAL ANALYSIS OF CYCLES IN EXCHANGE RATES, PETROLEUM PRODUCTS PRICES AND INTERNATIONAL RESERVES ACCUMULATION OF ASIAN PACIFIC COUNTRIES
David Umoru
E-mail: david.umoru@yahoo.com
Professor, PhD, Edo State University Uzairue
Iyamho, Nigeria
https://orcid.org/0000-0002-1198-299X
Beauty Igbinovia
E-mail: beauty.igbinovia@edouniversity.edu.ng
Lecturer II, PhD, Edo State University Uzairue
Iyamho, Nigeria
https://orcid.org/0000-0367-1492-2819
Timothy Igbafe Aliu
E-mail: timothyigbafe@yahoo.com
PhD Student, BSc, Edo State University Uzairue
Iyamho, Nigeria
https://orcid.org/0000-0326-4833-2894
Emoabino Muhammed
E-mail: emoabino@yahoo.com
PhD Student, BSc, Edo State University Uzairue
Iyamho, Nigeria
https://orcid.org/0000-0782-4335-2981
Abstract: This study delves into the empirical exploration of the impact of exchange rate volatility and dwindling petroleum products prices on foreign reserves of Asian pacific countries, specifically focusing on Australia, Bangladesh, New Zealand, South Korea, and Taiwan. We conducted the frequency domain analysis using daily data over the sample period of January 2, 2021 to November 12, 2024. This method was chosen for its robustness in analyzing the cyclical behavior of the variables in our study namely exchange rate instabilities, petroleum price variations, capital inflows and foreign reserves. Cycles were calculated as daily variations in the currency rates, petroleum prices, and capital inflows. The results show that distribution of foreign reserves for all countries indicates no significant deviations from the historical trend. The analysis also revealed that petroleum product prices and the volatility in exchange rates of countries in the Asian pacific region exhibit significant cyclical patterns with foreign reserves, particularly in the low-frequency bands, which align with long-term cycles. These cyclical patters are significant factors in the management of foreign exchange reserves. There is therefore the need macroeconomic management, and structural reforms, as being indispensable for enhancing economic resilience and stability against international economic uncertainties. Asian pacific countries should regionally develop frameworks to address the encounters posed by international exchange rate volatility. Joint initiatives to enhance sustainable financial stability across the region could mitigate the impact of external shocks on foreign reserves. This could involve enhancing regulatory frameworks to ensure financial stability and adapting to changing worldwide economic conditions. Policymakers should implement measures to monitor and manage volatile capital flows that can exacerbate exchange rate fluctuations and favourably impact reserves. This may include the use of capital controls during periods of extreme volatility, as well as measures to attract stable, and long-term capital investment. The governments of the Asian pacific countries should also largely focus on maintaining economic stability through effective exchange rate management, enhancing financial system resilience, and continue the transition to sustainable energy.
Keywords: Capital inflows, angular frequency, cycle/time unit, cycle frequency, periodogram,
frequency domain, foreign reserves
JEL classification: A20, B10, C30
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