There are two main schools of thought about the relationship between crude oil price and U.S. Dollar: the first (and more ancient) one which finds a positive relationship between both variables \emph{\it{i.e.}} a rise in the oil price coincides with an appreciation of the Dollar; the second one, supported by the financial theory, stands up to a negative relationship between the oil price variations and the Dollar value. The latter thesis is confirmed by the empirical evidence in the last thirty years, while a causality is verified in both directions. Besides, it is necessary to take into account how the futures and other financial derivatives have changed the way in which crude oil is priced and valued by the market. In this paper, we examine the literature about the above relation, inspecting whether or not the empirical results validate the theory.
ON THE RELATION BETWEEN CRUDE OIL PRICE AND U.S. DOLLAR AND USD/EUR EXCHANGE RATE
COSTA, Vincenzo;
2014-01-01
Abstract
There are two main schools of thought about the relationship between crude oil price and U.S. Dollar: the first (and more ancient) one which finds a positive relationship between both variables \emph{\it{i.e.}} a rise in the oil price coincides with an appreciation of the Dollar; the second one, supported by the financial theory, stands up to a negative relationship between the oil price variations and the Dollar value. The latter thesis is confirmed by the empirical evidence in the last thirty years, while a causality is verified in both directions. Besides, it is necessary to take into account how the futures and other financial derivatives have changed the way in which crude oil is priced and valued by the market. In this paper, we examine the literature about the above relation, inspecting whether or not the empirical results validate the theory.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.