Tovonony Razafindrabe (EconomiX-CNRS)

The aim of this paper is to study the relationship between the e¤ective exchange rate of the dollar and the oil price dynamics from 1976 to 2013. In this context, we propose to explore two important segments of classical explanations of the oil prices determination: the literature based on the co-movement theory and the economic literature dedicated to financial channels factors (exchange rate, monetary policy, and international liquidity) that could a¤ect the oil price dynamic. In addition to oil prices and the e¤ective exchange rate of the dollar, we use the dry cargo index as a proxy for the real economic activity and prices for precious and industrial raw materials. We then perform a Bayesian time-varying parameter vector auto-regressive estimation based on Kalman filter recursion. Our main results show that the US Dollar e¤ective exchange rate elasticity of the crude oil prices is not constant across the time and remains negative from 1989. It then highlights that a depreciation of the effective exchange rate of the dollar leads to an increase of the crude oil prices. Our paper also demonstrates the growing influence of financial and commodities markets development upon the global economy.