Paper #1461

Title:

Can oil prices forecast exchange rates?

Authors:

Domenico Ferraro, Ken Rogoff and Barbara Rossi

Date:

May 2011 (Revised: January 2015)

Abstract:

We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export price and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity price changes in our regression. However, when we use lagged commodity price changes, the predictive ability is ephemeral, mostly appearing after instabilities have been appropriately taken into account.

Keywords:

forecasting, oil prices, exchange rates.

JEL codes:

F31, F37, C22, C53.

Area of Research:

Macroeconomics and International Economics / Statistics, Econometrics and Quantitative Methods

Published in:

Journal of International Money, vol. 54 (1), pp. 116-141, 2015

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