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Updated: Dec 11, 2025
10:38
Measurement of the Rheology of Crude Oil in Equilibrium with CO2 at Reservoir Conditions
Published on: June 6, 2017
13.1K
Dynamic interactions between oil price and exchange rate.
César Castro1, Rebeca Jiménez-Rodríguez2
1Department of Economics, Universidad Pública de Navarra, Pamplona, Spain.
Plos One
|August 21, 2020
Summary
This study reveals that oil price shocks cause short-term U.S. dollar depreciation. Long-run exchange rate responses vary over time, impacting policy and investment strategies.
Area of Science:
- Economics
- Econometrics
Background:
- Understanding the dynamic interplay between effective exchange rates (EER) and oil prices is crucial for oil-importing economies.
- The U.S. economy, as a major oil importer, faces unique challenges from these fluctuations.
Purpose of the Study:
- To analyze the time-varying relationship between the U.S. effective exchange rate and oil prices.
- To inform policymakers and financial investors about the evolving economic impacts.
Main Methods:
- Utilized a Time-Varying Parameter Vector Autoregression (TVP-VAR) model.
- Employed monthly U.S. data spanning from January 1974 to July 2019.
Main Results:
- Oil price shocks consistently lead to short-run U.S. dollar depreciation.
- Long-run EER responses exhibit temporal diversity: appreciation pre-mid-2000s and post-mid-2010s, with depreciation in between.
- Oil prices react negatively and variably to U.S. EER appreciation over time.
Conclusions:
- Policy responses to oil price shocks require dynamic adjustments due to varying long-run EER effects.
- Understanding these time-varying effects is essential for financial investors to optimize portfolio risk-return profiles.
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