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Reassessing the empirical relationship between the oil price and the dollar

Virginie Coudert () and Valérie Mignon ()

No 2016-2, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper aims at reassessing the empirical relationship between the real price of oil and the U.S. dollar real effective exchange rate over the 1974-2015 period. We find that changes in both variables are now linked by a negative relationship, going from the dollar exchange rate to the real oil price. However, the same relationship is found positive when ending the sample in the mid-2000s, in line with the previous literature. To understand and investigate this evolution, we rely on a nonlinear, smooth transition regression model in which the oil pricedollar nexus depends on the dynamics followed by the U.S. currency. Our results show that the relationship is negative most of the times but turns positive when the dollar hits very high values, as in the early eighties.

Keywords: oil price; dollar real effective exchange rate; causality; nonlinearity. (search for similar items in EconPapers)
JEL-codes: C22 F31 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2016
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http://economix.fr/pdf/dt/2016/WP_EcoX_2016-02.pdf (application/pdf)

Related works:
Journal Article: Reassessing the empirical relationship between the oil price and the dollar (2016) Downloads
Working Paper: Reassessing the empirical relationship between the oil price and the dollar (2016)
Working Paper: Reassessing the empirical relationship between the oil price and the dollar (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2016-2

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