| dc.description.abstract | In this research, we attempt to explore the short and long run relationship between real crude
oil prices and currencies of the world’s major oil exporting countries from 2000 to 2015.
More specifically, exchange rates of Canadian Dollar (CAD), Mexican peso(MXN),
Norwegian Krone (NOR) measured against United States Dollar (USD) are placed under
scrutiny. We find bidirectional causality in the case of CAD/USD and West Texas
Intermediate crude oil (WTI) prices regardless of diverse frequency, yet only unidirectional
effect running from NOK/USD to Brent price at weekly and daily data. Unfortunately, from
our out-of sample forecast experiment, either crude oil price or exchange rate cannot serve as
efficient predictor for the other. For Mexico, the indication in favour of the linkage fails to
present at all. More interestingly, we uncover a strong and robust evidence that the positive
response of CAD/ USD to WTI and connection between NOK/USD and Brent are of more
robust in daily data than in weekly data and such a pronounced influence wipes out in
monthly observations. The plausible explanation is that market participants tend to assess
constantly economic news and development, so the short-lived effect spreads over time and
vanishes at lower frequency. We indeed acknowledge that the base currency is crucial to our
findings. We also extend another avenue of our approach to assess dollar effect by switching
the denominator of exchange rates to Euro and thereafter another surprising findings show
up that Canadian dollar-Euro exchange rates and Norwegian Krone-Euro exchange rates no
longer form stable and long run linkage with their corresponding oil price indices .The role
of US dollar in the oil-currency relationship is found to be obvious in the case of Canada | nb_NO |
