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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 oil price drivers 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, 2019. "Oil price drivers, geopolitical uncertainty and oil exporters’ currencies," Working Paper 2019/15, Norges Bank.
    • Handle: RePEc:bno:worpap:2019_15
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    File URL: https://hdl.handle.net/11250/2652837
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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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