Oil Prices and the Real Exchange Rate in Oil‐Exporting Countries

Abstract

This study investigated the impact of oil price shocks on the real exchange rate covering the most recent oil shock from 2000 to 2010 in 12 oil‐exporting countries, namely Algeria, Bahrain, Egypt, Indonesia, Kuwait, Nigeria, Oman, Qatar, Saudi Arabia, Sudan, United Arab Emirates and Venezuela. In this study, the panel model was implemented using six variables, namely the real exchange rate as the dependent variable, and oil price, government consumption expenditure, current account, inflation rate and gross domestic product based on the purchasing power parity as independent variables. The results we have arrived at show that the increases in oil prices have caused a real exchange rate appreciation in these countries.