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Oil Prices and Real Exchange Rate Movements in Oil-Exporting Countries: The Role of Institutions




Political and legal institutions affect the extent to which the real exchange rates of oil-exporting countries co-move with the oil price. In a simple theoretical model, strong institutions insulate real exchange rates from oil price volatility by generating a smooth pattern of fiscal spending over the price cycle. Empirical tests on a panel of 33 oil-exporting countries provide evidence that countries with high bureaucratic quality and strong and impartial legal systems have real exchange rates that co-move less with the oil price.

Suggested Citation

  • Rickne, Johanna, 2009. "Oil Prices and Real Exchange Rate Movements in Oil-Exporting Countries: The Role of Institutions," Working Paper Series 810, Research Institute of Industrial Economics, revised 15 Oct 2010.
  • Handle: RePEc:hhs:iuiwop:0810

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    Cited by:

    1. Muhammad Shahbaz & Aviral Kumar Tiwari & Mohammad Iqbal Tahir, 2015. "Analyzing time-frequency relationship between oil price and exchange rate in Pakistan through wavelets," Journal of Applied Statistics, Taylor & Francis Journals, vol. 42(4), pages 690-704, April.
    2. Komain Jiranyakul, 2015. "Oil Price Volatility and Real Effective Exchange Rate: The Case of Thailand," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 574-579.
    3. Tayfur Bayat & Saban Nazlioglu & Selim Kayhan, 2015. "Exchange Rate and Oil Price Interactions in Transition Economies: Czech Republic, Hungary and Poland," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(3), pages 267-285, June.
    4. Dina Azhgaliyeva, 2013. "What Makes Oil Revenue Funds Effective," International Conference on Energy, Regional Integration and Socio-economic Development 6023, EcoMod.
    5. Tatiana K. Blokhina & Oksana A. Karpenko & Andrey V. Guirinskiy, 2016. "The Relationship between Oil Prices and Exchange Rate in Russia," International Journal of Energy Economics and Policy, Econjournals, vol. 6(4), pages 721-726.

    More about this item


    Real Exchange Rate; Commodity Price; Institutions; Development;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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