ESTIMATION OF LONG-RUN RELATIONSHIP BETWEEN CRUDE OIL PRICE AND REAL EXCHANGE RATE OF US DOLLAR

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HOOSHMAND MAHMOOD; FAHIMI DOOAB REZA

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Journal: KNOWLEDGE AND DEVELOPMENT Year:2010 | Volume:17 | Issue:30 Page(s): 98-134

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Title

ESTIMATION OF LONG-RUN RELATIONSHIP BETWEEN CRUDE OIL PRICE AND REAL EXCHANGE RATE OF US DOLLAR

Author(s)

HOOSHMAND MAHMOOD | FAHIMI DOOAB REZA | Issue Writer Certificate

Keywords

PRICE OF CRUDE OILQ3

EFFECTIVE EXCHANGE RATEQ3

JOHANSEN-JUSELIUS METHODQ3

ERROR CORRECTION MODELQ3

CO-INTEGRATIONQ3

Abstract

Crude oil price and the U.S. EFFECTIVE EXCHANGE RATE are two main economic variables that have had real effects on world welfare situation. The aim of this paper is to test whether there is a stable long-run relationship between oil prices and the U.S. dollar, expressed in real term. To this end, we perform CO-INTEGRATION and causality tests between the two variables, using quarterly data from 1985: 1 to 2008: 4. Our results show that a 10% rise in the oil price coincides with a 1/8% depreciation of dollar in long-run, and that the causality runs from oil price to the dollar. Furthermore, we estimate the Vector ERROR CORRECTION MODEL (VECM) to analyze the short-run behavior of real EFFECTIVE EXCHANGE RATE and the speed of adjustment when it deviates from its long-run path. Results show that the speed of adjustment is 4/3 percent for each period that means in each period (or each season) the deviation of real EFFECTIVE EXCHANGE RATE dollar from long-run path shrink to reach its long-run path.

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APA: Copy

HOOSHMAND, MAHMOOD, & FAHIMI DOOAB, REZA. (2010). ESTIMATION OF LONG-RUN RELATIONSHIP BETWEEN CRUDE OIL PRICE AND REAL EXCHANGE RATE OF US DOLLAR. KNOWLEDGE AND DEVELOPMENT, 17(30), 98-134. SID. https://sid.ir/paper/75850/en

Vancouver: Copy

HOOSHMAND MAHMOOD, FAHIMI DOOAB REZA. ESTIMATION OF LONG-RUN RELATIONSHIP BETWEEN CRUDE OIL PRICE AND REAL EXCHANGE RATE OF US DOLLAR. KNOWLEDGE AND DEVELOPMENT[Internet]. 2010;17(30):98-134. Available from: https://sid.ir/paper/75850/en

IEEE: Copy

MAHMOOD HOOSHMAND, and REZA FAHIMI DOOAB, “ESTIMATION OF LONG-RUN RELATIONSHIP BETWEEN CRUDE OIL PRICE AND REAL EXCHANGE RATE OF US DOLLAR,” KNOWLEDGE AND DEVELOPMENT, vol. 17, no. 30, pp. 98–134, 2010, [Online]. Available: https://sid.ir/paper/75850/en

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