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The Link Between the Brent Crude Oil Price and the US Dollar Exchange Rate

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  • Filip Novotný

Abstract

Growth in the intensity of the inverse relationship between the US dollar exchange rate and the Brent crude oil price has been observed over the last decade. This may be linked, among other things, to the growing role of commodities as an alternative investment instrument at times of excess liquidity and low interest rates on global markets. This analysis examines monthly data from January 1982 to September 2010. Since 2002 the direction of the relationship in the Granger causality sense has been from the dollar exchange rate to the oil price. A weakening of the dollar of 1% causes the Brent oil price to rise by 2.1%. The contrary movements in the Brent oil price and the dollar exchange rate are a factor dampening the impact of sharp fl uctuations in the dollar price of oil on "non-dollar" economies, including the Czech Republic. This dampening effect was clearly visible in the period of sharp oil price growth in 2007 and 2008.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2012 (2012)
Issue (Month): 2 ()
Pages: 220-232

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Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:2:id:420:p:220-232

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Related research

Keywords: speculative demand; interest rates; financial markets; exchange rate movements; excess liquidity; commodity prices;

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References

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Citations

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Cited by:
  1. Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, August.
  2. Jaromir Baxa & Michal Franta & Tomas Havranek & Roman Horvath & Miroslav Plasil & Marek Rusnak & Borek Vasicek, 2013. "Transmission of Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 11, number rb11/1 edited by Jan Babecky & Roman Horvath, August.
  3. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, August.
  4. Yi Zhang, 2013. "The Links between the Price of Oil and the Value of US Dollar," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 341 - 351.
  5. Jose Peydro Alcalde & Sona Benecka & Alexis Derviz & Adam Gersl & Tomas Holub & Roman Horvath & Petr Jakubik & Narcisa Liliana Kadlcakova & Dorota Kowalczyk & Ivana Kubicova & Steven Ongena & Jakub Ry, 2012. "Financial Stability and Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 10, number rb10/2 edited by Jan Babecky & Roman Horvath, August.

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