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Oil prices and effective dollar exchange rates

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  • Beckmann, Joscha
  • Czudaj, Robert

Abstract

This study takes into account two previously neglected issues in its analysis of the relationship between oil prices and effective dollar exchange rates, namely, nonlinear adjustment dynamics and a distinction between nominal and real linkages. Beginning with a careful investigation of different subsets, and using a Markov-switching vector error correction model, we are able to discriminate long-run and time-varying short-run dynamics. Our findings show not only that the results depend on the choice of the exchange rate measure, but also that the time-varying causality patterns mainly runs from nominal exchange rates to nominal oil prices.

Suggested Citation

  • Beckmann, Joscha & Czudaj, Robert, 2013. "Oil prices and effective dollar exchange rates," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 621-636.
    • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:621-636
    DOI: 10.1016/j.iref.2012.12.002
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    More about this item

    Keywords

    Cointegration; Error correction; Oil price; Effective exchange rates; Markov-switching;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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