Fractional cointegration between energy imports to the EURO area and exchange rates to the US dollar

Maria Malmierca-Ordoqui (), Luis Gil-Alana and Manuel Monge
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Maria Malmierca-Ordoqui: Universidad Villanueva
Manuel Monge: Universidad Francisco de Vitoria (UFV)

Empirical Economics, 2024, vol. 66, issue 2, No 13, 859-882

Abstract: Abstract The global dominance of the dollar is unquestionable, but the European Commission is committed to strengthening the role of the euro in international relations. Most of the transactions between countries are paid in US dollars even though the United States does not participate in them. Some argue that the euro could become more powerful if it were given more presence in international trade, in particular, in the energy bill of the Eurozone. With the aim of validating that statement, this paper analyses the cointegrating structure between energy imports to the Euro Area from its main partners and those partners’ currency exchange rates to the US dollar. We find that there is a bivariate fractional cointegration relationship between the series in most of the countries considered.

Keywords: Energy trade; Exchange rates; Long memory; Fractional cointegration; Euro Area policy (search for similar items in EconPapers)
JEL-codes: C22 C32 F14 F31 Q43 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00181-023-02468-w

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