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Real Exchange Rate, Output and Oil: Case of Four Large Energy Producers

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  • Korhonen, Iikka

    ()
    (BOFIT)

  • Mehrotra, Aaron

    ()
    (BOFIT)

Abstract

We assess the effects of oil price shocks on real exchange rate and output in four large energy-producing countries: Iran, Kazakhstan, Venezuela, and Russia. We estimate four-variable structural vector autoregressive models using standard long-run restrictions. Not surprisingly, we find that higher real oil prices are associated with higher output. However, we also find that supply shocks are by far the most important driver of real output in all four countries, possibly due to ongoing transition and catching-up. Similarly, oil shocks do not account for a large share of movements in the real exchange rate, although they are clearly more significant for Iran and Venezuela than for the other countries.

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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 6/2009.

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Length: 36 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:hhs:bofitp:2009_006

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Keywords: structural VAR model; oil price; Iran; Kazakhstan; Russia; Venezuela;

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Cited by:
  1. Christian Dreger & Jarko Fidrmuc, 2009. "Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis," Working Paper / FINESS 5.6, DIW Berlin, German Institute for Economic Research.

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