The U.S. Dollar Exchange Rate and the Demand for Oil
34 Pages Posted: 28 Feb 2013
Date Written: February 27, 2013
Using recent advances in panel data estimation techniques, we find that an appreciation of the US dollar exchange rate leads to a significant decline in oil demand for a sample of 65 oil-importing countries. The estimated effect turns out to be much larger than the impact of a shift in the global crude oil price expressed in US dollar. Furthermore, the effect of the US dollar on oil demand tends to be declining over time and, for a subsample of OECD countries, stronger for an appreciation compared to a depreciation of the US dollar.
Keywords: oil demand, US dollar exchange rate, panel data, nonlinearities
JEL Classification: C330, F310, Q410
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