Journal
ENERGY ECONOMICS
Volume 32, Issue 2, Pages 399-408Publisher
ELSEVIER
DOI: 10.1016/j.eneco.2009.10.005
Keywords
Exchange rates; Monetary model; Oil prices; US dollar
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Adding oil prices to the monetary model of exchange rates, we find that oil prices significantly explain movements in the value of the U.S. dollar (USD) against major currencies from the 1970s to 2008. Our long-run and forecasting results are remarkably consistent with an oil-exchange rate relationship. Increases in real oil prices lead to a significant depreciation of the USD against net oil exporter currencies, such as Canada, Mexico, and Russia. On the other hand, the currencies of oil importers, such as Japan, depreciate relative to the USD when the real oil price goes up. (C) 2009 Elsevier B.V. All rights reserved.
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