EconPapers    
Economics at your fingertips  
 

Commodity currencies and causality: Some high-frequency evidence

Rashad Ahmed

Economics Letters, 2020, vol. 189, issue C

Abstract: I investigate the link between economic fundamentals and exchange rate adjustment to commodity price fluctuations. I overcome the traditional issue of simultaneity by exploiting the September 14, 2019 drone attack on two Saudi Arabian refineries as a natural experiment. This unanticipated event caused the largest 1-day global crude oil price shock in over a decade. Using high-frequency exchange rate data for 30 countries, I link the cross-section of exchange rate movements around the event to country-specific fundamentals and currency risk factors. Crude export and import intensities were associated with appreciation (depreciation). Additionally, countries with higher policy interest rates and weaker financial positions experienced greater currency depreciation while safe haven currencies appreciated, consistent with ‘risk-off’ sentiment triggering carry trades to unwind. Estimated (pre-event) crude oil and VIX betas can also explain the cross-section of exchange rate adjustment, and these currency risk factors are tightly associated with oil-related and financial fundamentals, respectively.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176520300422
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300422

DOI: 10.1016/j.econlet.2020.109016

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-07-23
Handle: RePEc:eee:ecolet:v:189:y:2020:i:c:s0165176520300422