IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Oil currencies in the face of oil shocks: What can be learned from time-varying specifications?

Listed author(s):
  • Jean-Pierre Allegret

    ()

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Cécile Couharde

    ()

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Valérie Mignon

    ()

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Tovonony Razafindrabe

    ()

While the oil currency property is clearly established from a theoretical viewpoint, its existence is less clear-cut in the empirical literature. We investigate the reasons for this apparent puzzle by studying the time-varying nature of the relationship between real effective exchange rates of five oil exporters and the real oil price in the aftermath of the oil price shocks of the last two decades. Accordingly, we rely on a time-varying parameter VAR specification which allows the responses of real exchange rates to different oil price shocks to evolve over time. We find that the reason of the mixed results obtained in the empirical literature is that oil currencies follow different hybrid models in the sense that oil countries’ real exchange rates may be driven by one or several sources of oil price shocks that furthermore can vary over time. In addition to structural changes affecting oil countries, structural changes arising from the oil market itself through the various, time-varying sources of oil price shocks are found to be crucial.

(This abstract was borrowed from another version of this item.)

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by HAL in its series Post-Print with number hal-01411812.

as
in new window

Length:
Date of creation: 2015
Publication status: Published in 55ème congrès annuel de la Société Canadienne de Science économique , 2015, Montréal, Canada
Handle: RePEc:hal:journl:hal-01411812
Note: View the original document on HAL open archive server: https://hal-univ-paris10.archives-ouvertes.fr/hal-01411812
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Cashin, Paul & Cespedes, Luis F. & Sahay, Ratna, 2004. "Commodity currencies and the real exchange rate," Journal of Development Economics, Elsevier, vol. 75(1), pages 239-268, October.
  2. Reboredo, Juan C., 2012. "Modelling oil price and exchange rate co-movements," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 419-440.
  3. Ron Alquist & Lutz Kilian, 2010. "What do we learn from the price of crude oil futures?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(4), pages 539-573.
  4. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
  5. Beckmann, Joscha & Czudaj, Robert, 2013. "Is there a homogeneous causality pattern between oil prices and currencies of oil importers and exporters?," Energy Economics, Elsevier, vol. 40(C), pages 665-678.
  6. Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva, 2013. "The Role of Speculation in Oil Markets: What Have We Learned So Far?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
  7. Renée Fry & Adrian Pagan, 2011. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 938-960, December.
  8. anonymous, 2008. "Financial turmoil and the economy," Annual Report, Federal Reserve Bank of San Francisco, pages 6-14.
  9. Lutz Kilian, 2014. "Oil Price Shocks: Causes and Consequences," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 133-154, October.
  10. Christiane Baumeister & Gert Peersman, 2013. "The Role Of Time‐Varying Price Elasticities In Accounting For Volatility Changes In The Crude Oil Market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(7), pages 1087-1109, November.
  11. El Anshasy, Amany A. & Bradley, Michael D., 2012. "Oil prices and the fiscal policy response in oil-exporting countries," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 605-620.
  12. Yu-Chin Chen & Kenneth S. Rogoff & Barbara Rossi, 2010. "Can Exchange Rates Forecast Commodity Prices?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1145-1194.
  13. Kirk Hamilton & John Hartwick, 2008. "Oil Stock Discovery and Dutch Disease," Working Papers 1163, Queen's University, Department of Economics.
  14. Anonymous, 2008. "Grains and Oilseeds Outlook for 2008," Agricultural Outlook Forum 2008 37903, United States Department of Agriculture, Agricultural Outlook Forum.
  15. Robert B. Barsky & Lutz Kilian, 2004. "Oil and the Macroeconomy Since the 1970s," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 115-134, Fall.
  16. Iikka Korhonen & Tuuli Juurikkala, 2009. "Equilibrium exchange rates in oil-exporting countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(1), pages 71-79, January.
  17. Cologni, Alessandro & Manera, Matteo, 2008. "Oil prices, inflation and interest rates in a structural cointegrated VAR model for the G-7 countries," Energy Economics, Elsevier, vol. 30(3), pages 856-888, May.
  18. Kenneth Rogoff & Yu-chin Chen, 2002. "Commodity Currencies and Empirical Exchange Rate Puzzles," IMF Working Papers 02/27, International Monetary Fund.
  19. Golub, Stephen S, 1983. "Oil Prices and Exchange Rates," Economic Journal, Royal Economic Society, vol. 93(371), pages 576-593, September.
  20. Peersman, Gert & Van Robays, Ine, 2012. "Cross-country differences in the effects of oil shocks," Energy Economics, Elsevier, vol. 34(5), pages 1532-1547.
  21. Q. Farooq Akram, 2004. "Oil prices and exchange rates: Norwegian evidence," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 476-504, December.
  22. Gert Peersman & Ine Van Robays, 2009. "Oil and the Euro area economy," Economic Policy, CEPR;CES;MSH, vol. 24, pages 603-651, October.
  23. Timothy Cogley & Thomas J. Sargent, 2005. "Drift and Volatilities: Monetary Policies and Outcomes in the Post WWII U.S," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(2), pages 262-302, April.
  24. Lutz Kilian & Daniel P. Murphy, 2012. "Why Agnostic Sign Restrictions Are Not Enough: Understanding The Dynamics Of Oil Market Var Models," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1166-1188, October.
  25. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
  26. Wang, Yudong & Wu, Chongfeng & Yang, Li, 2013. "Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1220-1239.
  27. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
  28. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  29. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2011. "Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies," The World Economy, Wiley Blackwell, vol. 34(9), pages 1557-1592, September.
  30. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
  31. Coudert, Virginie & Couharde, Cécile & Mignon, Valérie, 2015. "On the impact of volatility on the real exchange rate – terms of trade nexus: Revisiting commodity currencies," Journal of International Money and Finance, Elsevier, vol. 58(C), pages 110-127.
  32. Hassan Mohammadi & Mohammad Jahan-Parvar, 2012. "Oil prices and exchange rates in oil-exporting countries: evidence from TAR and M-TAR models," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(3), pages 766-779, July.
  33. Kilian, Lutz & Rebucci, Alessandro & Spatafora, Nikola, 2009. "Oil shocks and external balances," Journal of International Economics, Elsevier, vol. 77(2), pages 181-194, April.
  34. Atems, Bebonchu & Kapper, Devin & Lam, Eddery, 2015. "Do exchange rates respond asymmetrically to shocks in the crude oil market?," Energy Economics, Elsevier, vol. 49(C), pages 227-238.
  35. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
  36. Steigum, Erling Jr. & Thogersen, Oystein, 1995. "Petroleum wealth, debt policy, and intergenerational welfare: The case of Norway," Journal of Policy Modeling, Elsevier, vol. 17(4), pages 427-442, August.
  37. Sangjoon Kim & Neil Shephard & Siddhartha Chib, 1998. "Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 361-393.
  38. Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
  39. Habib, Maurizio Michael & Kalamova, Margarita Manolova, 2007. "Are there oil currencies? The real exchange rate of oil exporting countries," Working Paper Series 839, European Central Bank.
  40. C. Baumeister & G. Peersman & -, 2010. "Sources of the Volatility Puzzle in the Crude Oil Market," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/634, Ghent University, Faculty of Economics and Business Administration.
  41. Maurizio Michael Habib & Sascha Bützer & Livio Stracca, 2016. "Global Exchange Rate Configurations: Do Oil Shocks Matter?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 443-470, August.
  42. Chen, Shiu-Sheng & Chen, Hung-Chyn, 2007. "Oil prices and real exchange rates," Energy Economics, Elsevier, vol. 29(3), pages 390-404, May.
  43. Le, Thai-Ha & Chang, Youngho, 2013. "Oil price shocks and trade imbalances," Energy Economics, Elsevier, vol. 36(C), pages 78-96.
  44. Raymond, Jennie E & Rich, Robert W, 1997. "Erratum [Oil and the Macroeconomy: A Markov State-Switching Approach]," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 555-555, November.
  45. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 821-852.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01411812. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.