Can oil prices forecast exchange rates? An empirical analysis of the relationship between commodity prices and exchange rates

Domenico Ferraro, Kenneth Rogoff and Barbara Rossi

Journal of International Money and Finance, 2015, vol. 54, issue C, 116-141

Abstract: We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity price changes in our regression. However, when we use lagged commodity price changes, the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account.

Keywords: Exchange rates; Predictive ability; Out-of-sample fit (search for similar items in EconPapers)
JEL-codes: C22 C53 F31 F37 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (139)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:54:y:2015:i:c:p:116-141

DOI: 10.1016/j.jimonfin.2015.03.001

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