China and the Relationship Between the Oil Price and the Dollar

Agnès Bénassy-Quéré (), Valérie Mignon () and Alexis Penot

Working Papers from CEPII research center

Abstract: We study cointegration and causality between the real price of oil and the real price of the dollar over the 1974-2004 period. Our results suggest that a 10% rise in the oil price coincides with a 4.3% appreciation of the dollar in the long run, and that the causality runs from oil to the dollar. Through the development of a theoretical model, we then investigate possible reasons why this relationship could be reversed in the future due to the emergence of China as a major player on both the oil and the foreign exchange markets.

Keywords: Oil price; real exchange rate; dollar; euro; China; cointegration; causality; error correction model; dollar; energy cost; models; foreign exchange markets (search for similar items in EconPapers)
JEL-codes: C22 F31 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cna, nep-ene, nep-fmk, nep-sea and nep-tra
Date: 2005-10
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Related works:
Journal Article: China and the relationship between the oil price and the dollar (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cii:cepidt:2005-16

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