Summary of the Paper Entitled: Forecasting Fuel Prices with the Chilean Exchange Rate

Pablo Pincheira and Nabil Jarsun

MPRA Paper from University Library of Munich, Germany

Abstract: This draft is a summary of the paper entitled: Forecasting Fuel Prices with the Chilean Exchange Rate. In that paper we show that the Chilean exchange rate has the ability to predict the returns of oil prices and of three additional oil-related products: gasoline, propane and heating oil. The theoretical underpinnings of our empirical findings rely on the present-value theory for exchange rate determination and on the strong co-movement displayed by some commodity prices. The Chilean economy is heavily influenced by one particular commodity: copper, which represents nearly 50% of total national exports and attracts a similar share in terms of Foreign Direct Investment. As a consequence, the floating Chilean exchange rate is importantly affected by fluctuations in the copper price. As oil-related products display an important co-movement with base metal prices, it is reasonable to expect evidence of Granger causality from the Chilean peso to these oil-related products. We find substantial evidence of predictability both in-sample and out-of-sample. Our paper is part of a growing literature that in the recent years has explored the linkages between commodity prices and commodity currencies.

Keywords: Exchange rates; energy; oil; gasoline; commodity prices; predictability; time-series (search for similar items in EconPapers)
JEL-codes: C01 C02 C1 C12 C13 C2 C22 C3 C32 C4 C5 C51 C52 C53 C58 E31 E37 E58 F3 F31 F37 F4 F47 G12 G15 G17 (search for similar items in EconPapers)
Date: 2020-12-30
New Economics Papers: this item is included in nep-ene, nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:105056

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