Oil prices and exchange rates in oil-exporting countries: evidence from TAR and M-TAR models |
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Authors: | Hassan Mohammadi Mohammad R. Jahan-Parvar |
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Affiliation: | 1. Department of Economics, Illinois State University, Campus Box?4200, Normal, IL, 61790-4200, USA 2. Department of Economics, East Carolina University, A-426 Brewster Building, Greenville, NC, 27858, USA
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Abstract: | The paper studies the long-run relation and short-run dynamics between real oil prices and real exchange rates in a sample of 13 oil-exporting countries. The purpose of the study is to examine the possibility of Dutch disease in these countries. Tests of cointegration using threshold and momentum-threshold autoregressive (TAR and M-TAR) models suggest the possibility of the disease in 3-out-of 13 countries??Bolivia, Mexico and Norway. For these countries, we also find that (a) oil prices have a long-run effect on the exchange rates; and (b) exchange rates adjust faster to positive deviations from the equilibrium; and (c) there is no evidence of short-run causality between real exchange rates and real oil prices in either direction. Over all, these findings suggest a weak link between oil prices and real exchange rates and thus limited evidence in favor of the Dutch disease. |
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