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Chapter 6 Oil Prices and Exchange Rates: Some New Evidence Using Linear and Nonlinear Models

In: Nonlinear Modeling of Economic and Financial Time-Series

Author

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  • Mohamed El Hedi Arouri
  • Fredj Jawadi

Abstract

Purpose – The purpose of this chapter is to investigate the linear and nonlinear short- and long-run relationships between the real price of oil and the US real effective exchange rate. Methodology/approach – We use recent linear and nonlinear econometric techniques over the period 1973–2009. Findings – Our main findings are that (i) there is significant evidence that both variables contain a unit root; (ii) the oil price and the US exchange rate are strongly linked in the short run; and finally (iii) there are some signs of nonlinearity in the oil–exchange rate relationship. Originality – Using recent econometric techniques, we show that exchange rates are not a fundamental determinant of oil prices but exchange rate changes help to better forecast oil prices in the short run.

Suggested Citation

  • Mohamed El Hedi Arouri & Fredj Jawadi, 2010. "Chapter 6 Oil Prices and Exchange Rates: Some New Evidence Using Linear and Nonlinear Models," International Symposia in Economic Theory and Econometrics, in: Nonlinear Modeling of Economic and Financial Time-Series, pages 121-141, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-0386(2010)0000020011
    DOI: 10.1108/S1571-0386(2010)0000020011
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    Cited by:

    1. Fredj Jawadi & Wael Louhichi & Hachmi Ben Ameur & Abdoulkarim Idi Cheffou, 2017. "On Oil-US Exchange Rate Volatility Relationships: an Intradaily Analysis," Working Papers hal-04141662, HAL.

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    Keywords

    oil price;

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