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 1502-8190 (online)