Open AccessThe Impact of Oil Shocks on Exchange Rates: The Case of Selected OPEC Countries
Author(s) -
Shahram Fattahi,
Zainab Moridi,
Rasoul Moridi
Publication year - 2021
Publication title -
applied finance and accounting
Language(s) - English
Resource type - Journals
eISSN - 2374-2429
pISSN - 2374-2410
DOI - 10.11114/afa.v7i2.5188
Subject(s) - economics , exchange rate , shock (circulatory) , liberian dollar , demand shock , us dollar , quantile regression , econometrics , vector autoregression , revenue , monetary economics , quantile , finance , medicine
OPEC countries are heavily dependent on oil dollar revenues through which impact on exchange rates. The purpose of this study is to investigate the effect of oil shocks on the real exchange rates for selected OPEC countries for the period 1980-2018. The oil shocks are first obtained using the vector auto-regression model and then their effects on the exchange rates are estimated using a panel quantile regression model. The results show that effect of oil shocks on exchange rates varies across quantiles. The oil specific-demand shock and global demand shock have a negative and significant effect on the real exchange rates while the oil supply shock has a positive and significant effect on the real exchange rates in OPEC countries. Furthermore, oil specific-demand shock has the most impact on the real exchange rates.