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Oil Price and the Dollar

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Author Info

  • Virginie Coudert

    (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)

  • Valérie Mignon

    (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)

  • Alexis Penot

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

Abstract

The aim of this paper is to test whether a stable long-term relationship exists between oil prices and the US effective exchange rate, expressed in real terms. To this end, weproceed to a cointegration and causality study between the two variables. Our results indicate that causality runs from oil prices to the exchange rate and that the relationship between the two variables is transmitted through the US net foreign asset position.

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File URL: http://halshs.archives-ouvertes.fr/docs/00/35/34/04/PDF/papierPC7eng.pdf
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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00353404.

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Date of creation: 2008
Date of revision:
Publication status: Published, Energy Studies Review, 2008, 15, 2, ?
Handle: RePEc:hal:journl:halshs-00353404

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00353404/en/
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Related research

Keywords: oil prices; effective exchange rate; net foreign asset position; cointegration; causality; error correction model;

References

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  1. van Amano, Robert A & Norden, Simon, 1998. "Exchange Rates and Oil Prices," Review of International Economics, Wiley Blackwell, vol. 6(4), pages 683-94, November.
  2. Adrian W. Throop, 1993. "A generalized uncovered interest parity model of exchange rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
  3. Frankel, Jeffrey, 2003. "A Proposed Monetary Regime for Small Commodity Exporters: Peg the Export Price ('PEP')," International Finance, Wiley Blackwell, vol. 6(1), pages 61-88, Spring.
  4. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
  5. Robert A. Amano & Simon van Norden, 1995. "Oil Prices and the Rise and Fall of the U.S. Real Exchange Rate," International Finance 9502001, EconWPA.
  6. Dibooglu, Selahattin, 1996. "Real disturbances, relative prices and purchasing power parity," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 69-87.
  7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  8. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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Citations

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Cited by:
  1. C. Klein & O. Simon, 2010. "The MESANGE model: re-estimation on National Accounts base 2000 - Part 1 Version with fixed-base volumes," Documents de Travail de la DESE - Working Papers of the DESE g2010-03, Institut National de la Statistique et des Etudes Economiques, DESE.
  2. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2008. "Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies," Working Papers 2008-32, CEPII research center.
  3. François Lescaroux & Valérie Mignon, 2008. "On the Influence of Oil Prices on Economic Activity and Other Macroeconomic and Financial Variables," Working Papers 2008-05, CEPII research center.
  4. Wang, Yudong & Wu, Chongfeng, 2012. "Energy prices and exchange rates of the U.S. dollar: Further evidence from linear and nonlinear causality analysis," Economic Modelling, Elsevier, vol. 29(6), pages 2289-2297.
  5. Al-mulali, Usama & Che Sab, Normee, 2009. "The Impact of Oil Prices on the Real Exchange Rate of the Dirham: a Case Study of the United Arab Emirates," MPRA Paper 23493, University Library of Munich, Germany.
  6. François Benhmad, 2011. "A wavelet analysis of oil price volatility dynamic," Economics Bulletin, AccessEcon, vol. 31(1), pages 792-806.
  7. Berk, Istemi & Aydogan, Berna, 2012. "Crude Oil Price Shocks and Stock Returns: Evidence from Turkish Stock Market under Global Liquidity Conditions," EWI Working Papers 2012-15, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  8. Elbeck, Matt, 2010. "Advancing the design of a dynamic petro-dollar currency basket," Energy Policy, Elsevier, vol. 38(4), pages 1938-1945, April.
  9. Benhmad, François, 2012. "Modeling nonlinear Granger causality between the oil price and U.S. dollar: A wavelet based approach," Economic Modelling, Elsevier, vol. 29(4), pages 1505-1514.
  10. McPhail, Lihong Lu, 2011. "Assessing the impact of US ethanol on fossil fuel markets: A structural VAR approach," Energy Economics, Elsevier, vol. 33(6), pages 1177-1185.

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