A model of dynamic tail dependence between crude oil prices and exchange rates

We explore the tail dependence between crude oil prices and exchange rates via a dynamic quantile association regression model based on the flexible Fourier form. This method allows us to describe the quantile dependence between conditional distributions of assets. We first perform simulation exercises to gauge the estimation precision of our model. We then undertake empirical analyses to examine the dynamic relation between crude oil and nine exchange rates. We reveal a mildly symmetric tail dependence between these two assets but it increases sharply during the Great Recession of 2008. Further robustness check substantiates the baseline results. •This paper develops a new dynamic quantile association regression model by FFF.•This model is more flexible and precisive to capture tail dependence.•The dynamic relation between crude oil and nine exchange rates is examined on the tail.•The dependence is generally weak and symmetric but increase during the financial crisis.