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IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES

Year 2008, Volume: 1 Issue: 2, 181 - 189, 06.06.2014

Mete Feridun Grigoris Michailidis

Abstract

This study aims at investigating the link between international oil prices and the exchange rate in case of a small open industrial economy without oil resources such as Poland. The results of Granger-causality test show that the null hypotheses of Zloty-US dollar exchange rate does not granger cause rejection of Oil Price is not rejected while there exists reverse causality in 3 and 4 year lags at 5% and 10% levels. Therefore, we conclude that increases in oil prices have had a positive impact on the exchange rates over the period between 1982:12 and 2006:05.

Keywords

Oil Prices Exchange Rates Commodity Prices Cointegration

References

  • Akram, Q. F. & Holter, J. P. (1996). Oljepris og dollarkurs - en empirisk analyse. Penger og Kreditt 1996/3.
  • Akram, Q. F (2004). Oil prices and exchange rates: Norwegian Evidence. Econometrics Journal, 7,2, 476-504
  • Amano, R., & Van Norden, S. (1998). Oil Prices and the Rise and Fall of the US Real Exchange Rate. Journal of International Money and Finance, 17, 2, 299-316.
  • Atukeren, E. (2003). Oil Prices and the Swiss Economy, ECOMOD Conference in Istanbul (July 3-5, 2003).
  • Bénassy-Quéré, A., Mignon, V. & Penot, A. (2005). China and the Relationship between the Oil Price and the Dollar, CEPII, No: 2005 – 16, October.
  • Bjorvik, L. H., Mork, K. A. & Uppstad, B. H. (1998). Påvirkes kursen på norske kroner av verdensprisen på olje? Norsk Økonomisk Tidsskrift 1, 1.33.
  • Chaudhuri, K., & Daniel, B.C. (1998). Long-run Equilibrium Real Exchange Rates and Oil Prices, Economics Letters, 58, 2, 231-238.
  • De Grauwe, P. (1996). International Money: Postwar-trends and Theories, Oxford: Oxford University Press.
  • Dickey, D. A. & Fuller, W. A. (1979). Likelihood Ratio Statistics for Auto Regressive Time Series with a Unit Root. Econometrica, 49, 4, 1057–1072.
  • Dibooglu, S. (1996). Real Disturbances, Relative Prices, and Purchasing Power Parity. Journal of Macroeconomics, 18, 1, 69-87.
  • Dotsey, M. & Reid, M. (1992). Oil Shocks, Monetary Policy and Economic Activity. Economic Review. Federal Reserve Bank of Richmond, Richmond, VA. 14-27.
  • Engle, R. & Granger, C. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55, 251– 276.
  • Golub, S. S. (1983). Oil Prices and Exchange Rates. Economic Journal, 93, 576-593.
  • Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-spectral Methods. Econometrica, 37, 424–438.
  • Granger, C. W. J. (1981). Some Properties of Time Series Data and Their Use in Econometric Model Specification. Journal of Econometrics, 16, 121--130.
  • Granger, C. W. J. (1983). Co-Integrated Variables and Error-correcting Models. Unpublished UCSD Discussion Paper 83-13.
  • Hamilton, J. D. (1983). Oil and the Macroeconomy since World War II. Journal of Political Economy, 91:228-48.
  • Hassapis, C., Pittis, N., & Prodromidis, K. (1999). Unit Roots and Granger Causality in the EMS interest rates: the German Dominance Hypothesis Revisited. Journal of International Money Finance, 18,4, 7-73.
  • Johansen, S. (1995). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 59, 1551-1580.
  • Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inferences on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 69, 675-684.
  • Krugman, P. (1983a). Oil and the Dollar. In Economic Interdependence and Flexible Exchange Rates, edited by J. S. Bhandari and B. H. Putnam. Cambridge: MIT Press.
  • Krugman, P. (1983b). Oil Shocks and Exchange Rate Dynamics. In Exchange Rates and International Macroeconomics, edited by J. A. Frankel. Chicago: University of Chicago Press.
  • McGuirk, A. K. (1983). Oil Price Changes and Real Exchange Rate Movements among Industrial Countries. International Monetary Fund Staff Papers, 30, 843-83.
  • Rogoff, K. (1991). Oil, Productivity, Government Spending and the Real Yen-Dollar Exchange Rate. Working Paper 91-06. Federal Reserve Bank of San Francisco, San Francisco, CA.
  • Sargent, T. J. (1976). A Classical Macroeconometric Model for the United States. Journal of Political Economy, University of Chicago Press, 84, 2, 207-37.
  • Throop, A. W. (1993). A Generalized Uncovered Interest Parity Model of Exchange Rates. Economic Review, Federal Reserve Bank of San Francisco, 2, 3-16.
  • Yoshikawa, H. (1990). On the Equilibrium Yen-Dollar Rate. American Economic Review, 80, 576-83.
  • Shazly, M. R. (1989). The Oil Price Effect on the Dollar/Pound Rate of Exchange. International Economic Journal, 3, 73-83.
  • Zhou, S. (1995). The Response of Real Exchange Rates to Various Economic Shocks. Southern Economic Journal, XX, 936-54.

Year 2008, Volume: 1 Issue: 2, 181 - 189, 06.06.2014

Mete Feridun Grigoris Michailidis

Abstract

References

  • Akram, Q. F. & Holter, J. P. (1996). Oljepris og dollarkurs - en empirisk analyse. Penger og Kreditt 1996/3.
  • Akram, Q. F (2004). Oil prices and exchange rates: Norwegian Evidence. Econometrics Journal, 7,2, 476-504
  • Amano, R., & Van Norden, S. (1998). Oil Prices and the Rise and Fall of the US Real Exchange Rate. Journal of International Money and Finance, 17, 2, 299-316.
  • Atukeren, E. (2003). Oil Prices and the Swiss Economy, ECOMOD Conference in Istanbul (July 3-5, 2003).
  • Bénassy-Quéré, A., Mignon, V. & Penot, A. (2005). China and the Relationship between the Oil Price and the Dollar, CEPII, No: 2005 – 16, October.
  • Bjorvik, L. H., Mork, K. A. & Uppstad, B. H. (1998). Påvirkes kursen på norske kroner av verdensprisen på olje? Norsk Økonomisk Tidsskrift 1, 1.33.
  • Chaudhuri, K., & Daniel, B.C. (1998). Long-run Equilibrium Real Exchange Rates and Oil Prices, Economics Letters, 58, 2, 231-238.
  • De Grauwe, P. (1996). International Money: Postwar-trends and Theories, Oxford: Oxford University Press.
  • Dickey, D. A. & Fuller, W. A. (1979). Likelihood Ratio Statistics for Auto Regressive Time Series with a Unit Root. Econometrica, 49, 4, 1057–1072.
  • Dibooglu, S. (1996). Real Disturbances, Relative Prices, and Purchasing Power Parity. Journal of Macroeconomics, 18, 1, 69-87.
  • Dotsey, M. & Reid, M. (1992). Oil Shocks, Monetary Policy and Economic Activity. Economic Review. Federal Reserve Bank of Richmond, Richmond, VA. 14-27.
  • Engle, R. & Granger, C. (1987). Co-integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55, 251– 276.
  • Golub, S. S. (1983). Oil Prices and Exchange Rates. Economic Journal, 93, 576-593.
  • Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-spectral Methods. Econometrica, 37, 424–438.
  • Granger, C. W. J. (1981). Some Properties of Time Series Data and Their Use in Econometric Model Specification. Journal of Econometrics, 16, 121--130.
  • Granger, C. W. J. (1983). Co-Integrated Variables and Error-correcting Models. Unpublished UCSD Discussion Paper 83-13.
  • Hamilton, J. D. (1983). Oil and the Macroeconomy since World War II. Journal of Political Economy, 91:228-48.
  • Hassapis, C., Pittis, N., & Prodromidis, K. (1999). Unit Roots and Granger Causality in the EMS interest rates: the German Dominance Hypothesis Revisited. Journal of International Money Finance, 18,4, 7-73.
  • Johansen, S. (1995). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 59, 1551-1580.
  • Johansen, S. & Juselius, K. (1990). Maximum Likelihood Estimation and Inferences on Cointegration with Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 69, 675-684.
  • Krugman, P. (1983a). Oil and the Dollar. In Economic Interdependence and Flexible Exchange Rates, edited by J. S. Bhandari and B. H. Putnam. Cambridge: MIT Press.
  • Krugman, P. (1983b). Oil Shocks and Exchange Rate Dynamics. In Exchange Rates and International Macroeconomics, edited by J. A. Frankel. Chicago: University of Chicago Press.
  • McGuirk, A. K. (1983). Oil Price Changes and Real Exchange Rate Movements among Industrial Countries. International Monetary Fund Staff Papers, 30, 843-83.
  • Rogoff, K. (1991). Oil, Productivity, Government Spending and the Real Yen-Dollar Exchange Rate. Working Paper 91-06. Federal Reserve Bank of San Francisco, San Francisco, CA.
  • Sargent, T. J. (1976). A Classical Macroeconometric Model for the United States. Journal of Political Economy, University of Chicago Press, 84, 2, 207-37.
  • Throop, A. W. (1993). A Generalized Uncovered Interest Parity Model of Exchange Rates. Economic Review, Federal Reserve Bank of San Francisco, 2, 3-16.
  • Yoshikawa, H. (1990). On the Equilibrium Yen-Dollar Rate. American Economic Review, 80, 576-83.
  • Shazly, M. R. (1989). The Oil Price Effect on the Dollar/Pound Rate of Exchange. International Economic Journal, 3, 73-83.
  • Zhou, S. (1995). The Response of Real Exchange Rates to Various Economic Shocks. Southern Economic Journal, XX, 936-54.
There are 29 citations in total.

Details

Primary Language English
Journal Section Makaleler
Authors

Mete Feridun This is me

Grigoris Michailidis This is me

Publication Date June 6, 2014
Published in Issue Year 2008 Volume: 1 Issue: 2

Cite

APA Feridun, M., & Michailidis, G. (2014). IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES. International Journal of Emerging and Transition Economies, 1(2), 181-189.
AMA Feridun M, Michailidis G. IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES. International Journal of Emerging and Transition Economies. June 2014;1(2):181-189.
Chicago Feridun, Mete, and Grigoris Michailidis. “IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES”. International Journal of Emerging and Transition Economies 1, no. 2 (June 2014): 181-89.
EndNote Feridun M, Michailidis G (June 1, 2014) IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES. International Journal of Emerging and Transition Economies 1 2 181–189.
IEEE M. Feridun and G. Michailidis, “IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES”, International Journal of Emerging and Transition Economies, vol. 1, no. 2, pp. 181–189, 2014.
ISNAD Feridun, Mete - Michailidis, Grigoris. “IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES”. International Journal of Emerging and Transition Economies 1/2 (June 2014), 181-189.
JAMA Feridun M, Michailidis G. IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES. International Journal of Emerging and Transition Economies. 2014;1:181–189.
MLA Feridun, Mete and Grigoris Michailidis. “IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES”. International Journal of Emerging and Transition Economies, vol. 1, no. 2, 2014, pp. 181-9.
Vancouver Feridun M, Michailidis G. IMPACT OF OIL PRICES ON THE DOMESTIC CURRENCY IN A SMALL INDUSTRIAL ECONOMY WITHOUT OIL RESOURCES. International Journal of Emerging and Transition Economies. 2014;1(2):181-9.