Working Paper No. 810

Oil Prices and Real Exchange Rate Movements in Oil-Exporting Countries: The Role of Institutions

Published: September 23, 2009, revised October 2010Pages: 31Keywords: Real Exchange Rate; Commodity Price; Institutions; Development JEL-codes: F31, Q48, H11

Oil Prices and Real Exchange Rate Movements in Oil-Exporting Countries: The Role of Institutions Johanna Rickne


Political and legal institutions affect the extent to which the real exchange rates of oil-exporting countries co-move with the oil price. In a simple theoretical model, strong institutions insulate real exchange rates from oil price volatility by generating a smooth pattern of fiscal spending over the price cycle. Empirical tests on a panel of 33 oil-exporting countries provide evidence that countries with high bureaucratic quality and strong and impartial legal systems have real exchange rates that co-move less with the oil price.

 

Elgar Companion to

Social Capital and Health

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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