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Oil Prices and Real Exchange Rate Movements in Oil-Exporting Countries: The Role of Institutions

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Author Info

  • Rickne, Johanna

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

Political and legal institutions affect the extent to which the real exchange rates of oil-exporting countries co-move with the oil price. In a simple theoretical model, strong institutions insulate real exchange rates from oil price volatility by generating a smooth pattern of fiscal spending over the price cycle. Empirical tests on a panel of 33 oil-exporting countries provide evidence that countries with high bureaucratic quality and strong and impartial legal systems have real exchange rates that co-move less with the oil price.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 810.

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Length: 31 pages
Date of creation: 23 Sep 2009
Date of revision: 15 Oct 2010
Handle: RePEc:hhs:iuiwop:0810

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Related research

Keywords: Real Exchange Rate; Commodity Price; Institutions; Development;

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Cited by:
  1. Shahbaz, Muhammad & Tiwari, Aviral Kumar & Tahir, Mohammad Iqbal, 2013. "Analyzing Time-Frequency Relationship between Oil Price and Exchange Rate in Pakistan through Wavelets," MPRA Paper 48086, University Library of Munich, Germany, revised 05 Jul 2013.

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