On the impact of dollar movements on oil currencies
Gabriel Gomes ()
No 2016-1, EconomiX Working Papers from University of Paris Nanterre, EconomiX
This paper investigates to which extent dollar real exchange rate movements have a nonlinear impact on the short term dynamics of the real exchange rate of oil exporting economies. Estimating a panel cointegrating model for 11 OPEC and 5 major oil exporting countries over the 1980-2014 period, we find evidence to support their currencies can be considered as oil price driven. In fact, on the long run a 10% increase in the price of oil leads to a 2.1% appreciation of their real exchange rate. To analyse how dollar movements interact with the real exchange rate of those countries in the short run, we then estimate a panel smooth transition regression model. Results show that the real exchange rate of oil exporting economies is influenced by oil price fluctuations only if the dollar appreciation is lower than 2.6%. After the dollar appreciates beyond this threshold, their currencies are rather affected by other variables.
Keywords: Oil price; Oil currencies; Oil exporting; Non-linearities. (search for similar items in EconPapers)
JEL-codes: C33 F31 Q43 (search for similar items in EconPapers)
Pages: 32 pages
New Economics Papers: this item is included in nep-ene, nep-mon and nep-opm
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Working Paper: On the impact of dollar movements on oil currencies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2016-1
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