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Energy Prices and the Real Exchange Rate of Commodity-Exporting Countries

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  • Magali Dauvin

Abstract

This paper investigates the relationship between energy prices and the real effective exchange rate of commodity-exporting countries. We consider two sets of countries: 10 energy-exporting and 23 commodity-exporting countries over the period 1980-2011. Estimating a panel cointegrating relationship between the real exchange rate and its fundamentals, we provide evidence for the existence of "energy currencies". Relying on the estimation of panel smooth transition regression (PSTR) models, we show that there exists a certain threshold beyond which the real effective exchange rate of both energy and commodity exporters reacts to oil prices, through the terms-of-trade. More specifically, when oil price variations are low, the real effective exchange rates are not determined by terms-of-trade but by other usual fundamentals. Nevertheless, when the oil market is highly volatile, currencies follow an "oil currency" regime, terms-of-trade becoming an important driver of the real exchange rate.

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  • Magali Dauvin, 2013. "Energy Prices and the Real Exchange Rate of Commodity-Exporting Countries," Working Papers 2013-28, CEPII research center.
  • Handle: RePEc:cii:cepidt:2013-28
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    Cited by:

    1. repec:eco:journ2:2017-04-05 is not listed on IDEAS
    2. Allegret, Jean-Pierre & Mignon, Valérie & Sallenave, Audrey, 2015. "Oil price shocks and global imbalances: Lessons from a model with trade and financial interdependencies," Economic Modelling, Elsevier, vol. 49(C), pages 232-247.
    3. Ntokozo Patrick Nzimande & Marcel Kohler, 2016. "On the Validity of Purchasing Power Parity: Evidence from Energy Exporting Sub-Saharan Africa Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 71-82, July-Sept.
    4. repec:eee:eneeco:v:66:y:2017:i:c:p:399-410 is not listed on IDEAS
    5. Gabriel Gomes, 2016. "On the impact of dollar movements on oil currencies," Working Papers 2016-11, CEPII research center.
    6. repec:eco:journ1:2017-06-5 is not listed on IDEAS
    7. Gabriel Gomes, 2014. "Is the oil currency – oil price nexus affected by dollar swings?," EconomiX Working Papers 2014-53, University of Paris Nanterre, EconomiX.

    More about this item

    Keywords

    energy prices; terms-of-trade; exchange rate; commodity-exporting countries; panel cointegration; nonlinear model; PSTR;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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