The relationship between oil prices and exchange rates: Revisiting theory and evidence

By J. Beckmann, Robert L. Czudaj, Vipin Arora. Energy Economics, 2020

173 citations recorded by the source corpus.

This paper reviews existing theoretical and empirical research on the relationship between oil prices and exchange rates. We start with theoretical transmission channels—which point to bi-directional causality. Empirical research is classified and shows that the evidence varies substantially depending on sample, country choice and empirical method. Yet there are some common patterns: (i) strong links between exchange rates and oil prices are frequently observed over the long-run; and (ii) either exchange rates or oil prices are a potentially useful predictor of the other variable in the short-run, but the effects are strongly time-varying. We also identify some important avenues for future research.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/693469989463c73e6ca4adb8e822b1e1361419f5