The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach

The aim of this paper is to study the relationship between the effective exchange rate of the dollar and the oil price dynamics from 1976 to 2013. We explore the links between financial factors (exchange rate, monetary policy, international liquidity) and the oil price volatility. Using a Bayesian t...

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Main Authors: Vincent Brémond, Emmanuel Hache, Tovonony Razafindrabe
Format: Article
Language:English
Published: Università Carlo Cattaneo LIUC 2016-07-01
Series:The European Journal of Comparative Economics
Subjects:
Online Access:http://eaces.liuc.it/18242979201601/182429792016130106.pdf
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spelling doaj-d8b7122b0bcf45b7a96793ca0ed65f172020-11-25T00:41:12ZengUniversità Carlo Cattaneo LIUCThe European Journal of Comparative Economics1824-29792016-07-0113197131The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approachVincent BrémondEmmanuel HacheTovonony RazafindrabeThe aim of this paper is to study the relationship between the effective exchange rate of the dollar and the oil price dynamics from 1976 to 2013. We explore the links between financial factors (exchange rate, monetary policy, international liquidity) and the oil price volatility. Using a Bayesian time-varying parameter vector auto-regressive estimation we demonstrate that the “historical coincidence” of oil and financial crises can be explained by the specificities of the relationship between these two commodities. The results of this paper are twofold. The US Dollar effective exchange rate elasticity of crude oil prices is not constant across time and remains negative from 1989: a depreciation of the effective exchange rate of the dollar triggers an increase of crude oil prices. This paper also demonstrates the contagion of financial commodities markets development upon the global economy.http://eaces.liuc.it/18242979201601/182429792016130106.pdfExchange rateoil price
collection DOAJ
language English
format Article
sources DOAJ
author Vincent Brémond
Emmanuel Hache
Tovonony Razafindrabe
spellingShingle Vincent Brémond
Emmanuel Hache
Tovonony Razafindrabe
The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
The European Journal of Comparative Economics
Exchange rate
oil price
author_facet Vincent Brémond
Emmanuel Hache
Tovonony Razafindrabe
author_sort Vincent Brémond
title The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
title_short The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
title_full The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
title_fullStr The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
title_full_unstemmed The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach
title_sort oil price and exchange rate relationship revisited: a time-varying var parameter approach
publisher Università Carlo Cattaneo LIUC
series The European Journal of Comparative Economics
issn 1824-2979
publishDate 2016-07-01
description The aim of this paper is to study the relationship between the effective exchange rate of the dollar and the oil price dynamics from 1976 to 2013. We explore the links between financial factors (exchange rate, monetary policy, international liquidity) and the oil price volatility. Using a Bayesian time-varying parameter vector auto-regressive estimation we demonstrate that the “historical coincidence” of oil and financial crises can be explained by the specificities of the relationship between these two commodities. The results of this paper are twofold. The US Dollar effective exchange rate elasticity of crude oil prices is not constant across time and remains negative from 1989: a depreciation of the effective exchange rate of the dollar triggers an increase of crude oil prices. This paper also demonstrates the contagion of financial commodities markets development upon the global economy.
topic Exchange rate
oil price
url http://eaces.liuc.it/18242979201601/182429792016130106.pdf
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