Norges Bank

Working Paper

Oil price drivers, geopolitical uncertainty and oil exporters’ currencies

Q. Farooq Akram
Working Paper

Empirical relationships between crude oil prices and exchange rates of oil exporting countries tend to vary over time. I use econometric models of the norwegian and canadian nominal exchange rates to investigate whether such time-variation could reflect shifts in the key oil price drivers over time. Results suggest that demand- and supply-driven oil price increases strengthen these currencies to different extents. In contrast, heightened geopolitical uncertainty and associated oil price increases go together with a weakening of oil exporters’ currencies. The latter result may explain coincidences of higher oil prices and a weakening of oil exporters’ currencies.

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ISSN 1502-8143 (online)

Published 19 September 2019 10:00
Published 19 September 2019 10:00