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Hypothesis of Currency Basket Pricing of Crude Oil: An Iranian Perspective

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  • Melhem Sadek
  • Diallo Abdul Salam
  • Terraza Michel
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    Abstract

    The decline in the value of US dollar and the emergence of other currencies has opened the debate within OPEC, of whether it is possible to resort to the pricing of crude oil in alternative currencies. The debate was limited because of the inadequate liquidity of most other currencies. In this paper, we focus on the implications of the shift in the pricing of Iran’s crude oil to other currencies than the US dollar. The results demonstrated that the pricing for Iranian oil in US dollar had high reaction potential and responded moderately to the change in the exchange rate, when compared to the pricing in Euro and in Yen. Consequently, it appeared that stability on the financial market led to partial stability in the oil market.

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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2011-13.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 11-13.

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    Length: 14 pages
    Date of creation: Jun 2011
    Date of revision: Jun 2011
    Handle: RePEc:lam:wpaper:11-13

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    Related research

    Keywords: Crude Oil Pricing; Currency Basket; OPEC; Exchange Rate of Dollar; Euros; Yen.;

    This paper has been announced in the following NEP Reports:

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    1. Bollino, Carlo Andrea, 2007. "Oil prices and the U.S. trade deficit," Journal of Policy Modeling, Elsevier, vol. 29(5), pages 729-738.
    2. Griffin, James M, 1985. "OPEC Behavior: A Test of Alternative Hypotheses," American Economic Review, American Economic Association, vol. 75(5), pages 954-63, December.
    3. Magda E. Kandil & Mohsen Bahmani-Oskooee, 2007. "Exchange Rate Fluctuations and Output in Oil-Producing Countries," IMF Working Papers 07/113, International Monetary Fund.
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