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The Role of Oil Prices in Exchange Rate Movements: The CIS Oil Exporters

King Abdullah Petroleum Studies and Research Center, P.O. Box 88550, Riyadh 11672, Saudi Arabia
Research Program on Forecasting, Economics Department, The George Washington University, 2115 G Street, NW, Washington, DC 20052, USA
Institute of Control Systems, B. Vahabzade Street 9, Baku AZ1141, Azerbaijan
Department of Statistics, Azerbaijan State University of Economics, Istiqlaliyyat Str., 6, Baku AZ1001, Azerbaijan
Institute for Scientific Research on Economic Reforms, 88a, Hasan Bey Zardabi Avenue, Baku AZ1011, Azerbaijan
Faculty of Business and International Relations, Vistula University, 3 Stokłosy Str., Warsaw 02-787, Poland
Department of Finance, Baku Engineering University, Hasan Aliyev 120, Khirdalan AZ0101, Azerbaijan
The Institute of Economics, Azerbaijan National Academy of Sciences, H. Javid pr., 115., Baku AZ1001, Azerbaijan
Author to whom correspondence should be addressed.
Academic Editor: Juan C. Reboredo
Economies 2017, 5(2), 13;
Received: 26 February 2017 / Revised: 3 April 2017 / Accepted: 12 April 2017 / Published: 19 April 2017
(This article belongs to the Special Issue Falling Oil Prices: Economic and Financial Implications)
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Undoubtedly, oil prices play a crucial role in the macroeconomic performances of oil-exporting developing countries. In this regard, the exchange rate is one of the key macroeconomic indicators worthy of investigation. Existing literature shows that world oil prices play an important role in the appreciation of the exchange rates of oil-exporting developing countries. However, only a few studies have examined this issue by considering all three oil-exporting countries of the Commonwealth Independent States, namely Azerbaijan, Kazakhstan and Russia, together. In order to fill this gap and given the increasing importance of these economies in the world’s energy markets, this paper examines the role of oil prices in the movement of real effective exchange rates of the above-mentioned CIS countries. We applied the autoregressive distributed lag bounds testing method with a small sample bias correction to the data of these countries over the 2004Q1–2013Q4 period. The estimation results indicate that oil prices are certainly a main driver behind real effective exchange rate appreciation in the selected economies. Moreover, estimations show that productivity, to some extent, can also lead to the appreciation. The policy implication of this research is that an appreciation of the real exchange rate is harmful for the exports of non-oil goods and services in these countries. Since oil prices lead to the appreciation mainly through higher domestic prices, which is a result of tremendous public spending, decision-makers should reconsider the prevailing fiscal policy to make it much more counter-cyclical. View Full-Text
Keywords: real effective exchange rate; oil price; CIS oil exporters; autoregressive distributed lag bounds testing approach real effective exchange rate; oil price; CIS oil exporters; autoregressive distributed lag bounds testing approach

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Hasanov, F.; Mikayilov, J.; Bulut, C.; Suleymanov, E.; Aliyev, F. The Role of Oil Prices in Exchange Rate Movements: The CIS Oil Exporters. Economies 2017, 5, 13.

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