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Oil Prices and Exchange Rates in Oil-Exporting Countries: Evidence from TAR and M-TAR Models

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Author Info
Mohammadi, Hassan
Jahan-Parvar, Mohammad R.

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Abstract

The paper studies the long-run relation and short-run dynamics between real oil prices and real exchange rates in a sample of fourteen oil-exporting countries to examine the possibility of Dutch disease in these countries. The results, based on threshold and momentum-threshold autoregressive (TAR and M-TAR) tests of cointegration, are mixed. Support for Dutch disease is found in five countries. For these countries, we also find evidence of (a) long-run uni-directional causality from oil prices to exchange rates; (b) faster adjustments in exchange rates to positive deviations from the equilibrium; and (c) short-run unidirectional causality from oil prices to exchange rates in two countries, unidirectional causality from exchange rates to oil prices in one country, and bi-directional causality between oil prices and exchange rates in one country.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14578.

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Date of creation: Feb 2009
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Handle: RePEc:pra:mprapa:14578

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Related research
Keywords: Asymmetry; Cointegration; Dutch Disease; Error Correction; Oil Prices; Real Exchange Rates; Threshold and Momentum Threshold Autoregressive Models;

Find related papers by JEL classification:
F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation
F31 - International Economics - - International Finance - - - Foreign Exchange

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References listed on IDEAS
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  1. Bajo-Rubio, Oscar & Diaz-Roldan, Carmen & Esteve, Vicente, 2004. "Searching for threshold effects in the evolution of budget deficits: an application to the Spanish case," Economics Letters, Elsevier, vol. 82(2), pages 239-243, February. [Downloadable!] (restricted)
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  2. Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," NBER Working Papers 0852, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Mohammad R. Jahan-Parvar & Hassan Mohammadi, 2009. "Oil prices and competitiveness: time series evidence from six oil-producing countries," Journal of Economic Studies, Emerald Group Publishing, vol. 36(1), pages 98-118, January. [Downloadable!] (restricted)
  8. Pippenger, Michael K & Goering, Gregory E, 1993. "A Note on the Empirical Power of Unit Root Tests under Threshold Processes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(4), pages 473-81, November.
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  14. Edwards, Sebastian & Aoki, Masanao, 1983. "Oil export boom and Dutch-disease : A dynamic analysis," Resources and Energy, Elsevier, vol. 5(3), pages 219-242, September. [Downloadable!] (restricted)
  15. Fardmanesh, Mohsen, 1991. "Dutch disease economics and oil syndrome: An empirical study," World Development, Elsevier, vol. 19(6), pages 711-717, June. [Downloadable!] (restricted)
  16. Bruno, Michael & Sachs, Jeffrey, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," Review of Economic Studies, Blackwell Publishing, vol. 49(5), pages 845-59, Special I. [Downloadable!] (restricted)
  17. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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