Analysis of the Causality between Airline Price Index and Dollar and Oil Prices

Abstract

The Airline Price Index is a stock market index that monitors the stock prices of companies within the airline industry, reflecting the overall value of these airline companies. This index is an important tool for assessing the financial health, economic status, and market performance of the airline industry. This study aims to explore the causal relationships between the Airline Price Index (AIR), the Dollar Index (DXY), and Oil Prices (OIL), thereby contributing to a deeper understanding of the dynamics influencing the airline industry. In this study, a number of different Granger causality tests are employed, including the Granger causality test, the Fourier Toda-Yamamoto causality test, the Fourier Standard Granger causality test, and the Fourier Toda & Yamamoto test, as well as the cumulative frequency test and the Hatemi-J (2012) causality analysis. These are used to examine the causality relationship between AIR, OIL and DXY. The results of the analysis indicate that the expected causality relationship from OIL to AIR is not supported by the entire analysis method. In contrast, the Granger causality test results indicate that there is a unidirectional causal relationship from AIR to OIL and DXY. Furthermore, the results of the Fourier-Toda-Yamamoto and Fourier standard Granger analyses are consistent with one another. Considering these findings, it can be concluded that there is bidirectional causality between DXY and AIR. The findings of the Fourier-Toda & Yamamoto (cumulative frequency) analysis indicate the presence of a causality relationship from AIR to OIL and DXY. These findings are consistent with the results of Granger causality tests.