Oil prices and exchange rates in oil-exporting countries: evidence from TAR and M-TAR models

The paper studies the long-run relation and short-run dynamics between real oil prices and real exchange rates in a sample of 13 oil-exporting countries. The purpose of the study is to examine the possibility of Dutch disease in these countries. Tests of cointegration using threshold and momentum-th...

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Bibliographic Details
Published in:Journal of economics and finance 2012-07, Vol.36 (3), p.766-779
Main Authors: Mohammadi, Hassan, Jahan-Parvar, Mohammad R.
Format: Article
Language:English
Subjects:
Asymmetry
C32
C52
Cointegration
Crude oil prices
Dutch Disease
Economics
Economics and Finance
Equilibrium
Error Correction
Exporters
F31
F37
F47
Finance
Foreign exchange rates
Fuel oil prices
Hypotheses
International comparisons
JEL Classification
Macroeconomics/Monetary Economics//Financial Economics
Oil Prices
Petroleum industry
Real Exchange Rates
Regression analysis
Studies
Symmetry
Threshold and Momentum Threshold Autoregressive Models
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Summary:The paper studies the long-run relation and short-run dynamics between real oil prices and real exchange rates in a sample of 13 oil-exporting countries. The purpose of the study is to examine the possibility of Dutch disease in these countries. Tests of cointegration using threshold and momentum-threshold autoregressive (TAR and M-TAR) models suggest the possibility of the disease in 3-out-of 13 countries—Bolivia, Mexico and Norway. For these countries, we also find that (a) oil prices have a long-run effect on the exchange rates; and (b) exchange rates adjust faster to positive deviations from the equilibrium; and (c) there is no evidence of short-run causality between real exchange rates and real oil prices in either direction. Over all, these findings suggest a weak link between oil prices and real exchange rates and thus limited evidence in favor of the Dutch disease.
ISSN:1055-0925
1938-9744
DOI:10.1007/s12197-010-9156-5