Can Oil Prices Forecast Exchange Rates?

Kenneth Rogoff, Barbara Rossi and Domenico Ferraro

No 8635, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly frequencies. In contrast, the main contribution is to show the existence of a very short-term relationship at the daily frequency, which is rather robust and holds no matter whether we use contemporaneous (realized) or lagged oil prices in our regression. However, in the latter case the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account.

Keywords: Exchange; rates (search for similar items in EconPapers)
JEL-codes: C22 C53 F31 F37 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-cba, nep-ene, nep-for and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Can Oil Prices Forecast Exchange Rates? (2015)
Working Paper: Can Oil Prices Forecast Exchange Rates? (2012)
Working Paper: Can Oil Prices Forecast Exchange Rates? (2011)
Working Paper: Can oil prices forecast exchange rates? (2011)
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