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Crude Oil Prices and the USD/EUR Exchange Rate

  • Andreas Breitenfellner

    ()

    (Oesterreichische Nationalbank)

  • Jesus Crespo Cuaresma

    ()

    (Oesterreichische Nationalbank)

This paper investigates the impact of changes in the U.S. dollar/euro exchange rate on crude oil prices. The negative correlation of these two variables is ascribed to five possible channels: on the supply side, the purchasing power of oil export revenues and on the demand side, local prices in non-U.S. dollar regions, investments in crude oil-related asset markets, the monetary policy regime in oil-exporting countries and the efficiency of the currency market. We give evidence that using information on the U.S. dollar/euro exchange rate (and its determinants) significantly improves oil price forecasts. We discuss the possible implications these results might suggest with regard to the stabilization of oil prices or the adjustment of global imbalances.

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File URL: https://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Monetary-Policy-and-the-Economy/2008/Monetary-Policy-and-the-Economy-Q4-08/chapters/mop_2008_q4_analyses_01_tcm16-97551.pdf
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Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Monetary Policy & the Economy.

Volume (Year): (2008)
Issue (Month): 4 ()
Pages:

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Handle: RePEc:onb:oenbmp:y:2008:i:4:b:6
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