Are There Oil Currencies? The Real Exchange Rate of Oil Exporting Countries

41 Pages Posted: 17 Dec 2007

See all articles by Maurizio Michael Habib

Maurizio Michael Habib

European Central Bank (ECB)

Margarita M. Kalamova

Organisation for Economic Co-Operation and Development

Date Written: December 2007

Abstract

This paper investigates whether the real oil price has an impact on the real exchange rates of three main oil-exporting countries: Norway, Russia and Saudi Arabia. We create our measure of the real effective exchange rates for Norway and Saudi Arabia (1980-2006) and for Russia (1995-2006), testing if real oil prices and productivity differentials against 15 OECD countries influence exchange rates. In the case of Russia it is possible to establish a positive long-run relationship between the real oil price and the real exchange rate. However, we find virtually no impact of the real oil price on the real exchange rates of Norway and Saudi Arabia. The diverse exchange rate regimes cannot help in explaining the different empirical results on the impact of oil prices across countries, which instead may be due to other policy responses, namely the accumulation of net foreign assets and their sterilisation, and specific institutional characteristics.

Keywords: Real exchange rate, oil price, purchasing power parity, terms of trade, oil exporting countries

JEL Classification: F31, C22

Suggested Citation

Habib, Maurizio Michael and Kalamova, Margarita M., Are There Oil Currencies? The Real Exchange Rate of Oil Exporting Countries (December 2007). ECB Working Paper No. 839. Available at SSRN: https://ssrn.com/abstract=1032834

Maurizio Michael Habib (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Margarita M. Kalamova

Organisation for Economic Co-Operation and Development ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Register to save articles to
your library

Register

Paper statistics

Downloads
572
Abstract Views
2,352
rank
47,957
PlumX Metrics