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Oil price drivers, geopolitical uncertainty and oil exporters' currencies

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  • Akram, Q. Farooq

Abstract

Empirical relationships between crude oil prices and exchange rates of oil exporting countries tend to vary over time. I use econometric models of the Norwegian and Canadian nominal exchange rates to investigate whether such time-variation could reflect shifts in the key drivers of oil prices over time. Results suggest that demand- and supply-driven oil price increases strengthen these currencies to different extents. In contrast, heightened geopolitical uncertainty and associated oil price increases go together with a weakening of oil exporters' currencies. The latter result may explain coincidences of higher oil prices and a weakening of oil exporters' currencies.

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  • Akram, Q. Farooq, 2020. "Oil price drivers, geopolitical uncertainty and oil exporters' currencies," Energy Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:eneeco:v:89:y:2020:i:c:s0140988320301419
    DOI: 10.1016/j.eneco.2020.104801
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    9. Krzysztof Drachal, 2022. "Forecasting the Crude Oil Spot Price with Bayesian Symbolic Regression," Energies, MDPI, vol. 16(1), pages 1-29, December.
    10. Wu, Jie & Zhao, Ruizeng & Sun, Jiasen & Zhou, Xuewei, 2023. "Impact of geopolitical risks on oil price fluctuations: Based on GARCH-MIDAS model," Resources Policy, Elsevier, vol. 85(PB).
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    15. Cheng, Sheng & Han, Lingyu & Cao, Yan & Jiang, Qisheng & Liang, Ruibin, 2022. "Gold-oil dynamic relationship and the asymmetric role of geopolitical risks: Evidence from Bayesian pdBEKK-GARCH with regime switching," Resources Policy, Elsevier, vol. 78(C).
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    More about this item

    Keywords

    Exchange rates; Commodity currencies; Oil prices; Uncertainty;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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