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A stylized exchange rate pass‐through model of crude oil price formation

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  • Ayoub Yousefi
  • Tony S. Wirjanto

Abstract

This paper presents a stylized exchange rate pass‐through model of crude oil price formation for the purpose of understanding the price reactions of OPEC Member Countries to changes in the exchange rate of the US dollar against major currencies and the prices of other Members. Our empirical results suggest that, in response to changes in the exchange rate, exporting countries tend to adjust their prices to secure a stable international purchasing power of oil revenues and to avoid suppressing market demand and losing market share.

Suggested Citation

  • Ayoub Yousefi & Tony S. Wirjanto, 2005. "A stylized exchange rate pass‐through model of crude oil price formation," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(3), pages 177-197, September.
    • Handle: RePEc:bla:opecrv:v:29:y:2005:i:3:p:177-197
    DOI: 10.1111/j.0277-0180.2005.00150.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Marcel Fratzscher & Daniel Schneider & Ine Van Robays, 2013. "Oil Prices, Exchange Rates and Asset Prices," Discussion Papers of DIW Berlin 1302, DIW Berlin, German Institute for Economic Research.
    2. Elbeck, Matt, 2010. "Advancing the design of a dynamic petro-dollar currency basket," Energy Policy, Elsevier, vol. 38(4), pages 1938-1945, April.
    3. Jaime Marquez & Silvia Merler, 2020. "A Note on the Empirical Relation between Oil Prices and the Value of the Dollar," JRFM, MDPI, vol. 13(8), pages 1-16, July.
    4. Andreas Breitenfellner & Jesus Crespo Cuaresma, 2008. "Crude Oil Prices and the USD/EUR Exchange Rate," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
    5. Jaime Marquez, 2022. "Oil Prices and Exchange Rates: Measurement Matters," Commodities, MDPI, vol. 1(1), pages 1-15, September.
    6. Brahmasrene, Tantatape & Huang, Jui-Chi & Sissoko, Yaya, 2014. "Crude oil prices and exchange rates: Causality, variance decomposition and impulse response," Energy Economics, Elsevier, vol. 44(C), pages 407-412.
    7. Jesús Crespo-Cuaresma & Andreas Breitenfellner, "undated". "Crude Oil Prices and the Euro-Dollar Exchange Rate: A Forecasting Exercise," Working Papers 2008-08, Faculty of Economics and Statistics, Universität Innsbruck.
    8. Mongi Arfaoui & Aymen Ben Rejeb, 2017. "Oil, gold, US dollar and stock market interdependencies: a global analytical insight," European Journal of Management and Business Economics, Emerald Group Publishing Limited, vol. 26(3), pages 278-293, October.

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