Oil prices and the euro exchange rate

Kyriaki G. Louka and Nektarios Michail
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Kyriaki G. Louka: Central Bank of Cyprus

International Economics and Economic Policy, 2024, vol. 21, issue 4, No 10, 969-983

Abstract: Abstract We use cointegration-based techniques to investigate the relationship between oil prices and the euro effective exchange rate taking also into account the influence of interest rates and stock prices. We find that higher oil prices cause a depreciation in the euro exchange rate (either nominal or real) in the short run. This suggests that during episodes of higher energy prices, the euro area consumer is faced with additional price pressures, as a depreciated euro causes import prices to further rise. Our study also indicates that as stock prices rise in the short and long term, the euro appreciates, while higher oil prices will likely result in overall higher policy rates and lower stock prices.

Keywords: Euro effective exchange rate; Oil prices; Euribor; Stock prices (search for similar items in EconPapers)
JEL-codes: C32 E44 F31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10368-024-00622-y

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