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Oil price drivers, geopolitical uncertainty and oil exporters' currencies

Qaisar Akram

Energy Economics, 2020, vol. 89, issue C

Abstract: Empirical relationships between crude oil prices and exchange rates of oil exporting countries tend to vary over time. I use econometric models of the Norwegian and Canadian nominal exchange rates to investigate whether such time-variation could reflect shifts in the key drivers of oil prices over time. Results suggest that demand- and supply-driven oil price increases strengthen these currencies to different extents. In contrast, heightened geopolitical uncertainty and associated oil price increases go together with a weakening of oil exporters' currencies. The latter result may explain coincidences of higher oil prices and a weakening of oil exporters' currencies.

Keywords: Exchange rates; Commodity currencies; Oil prices; Uncertainty (search for similar items in EconPapers)
JEL-codes: C22 C51 F31 F32 Q41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eneco.2020.104801

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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