| The rise in oil prices in the euro area has been moderated by the appreciation of the euro against the dollar, since 2002. The
trends in both variables, however, are atypical compared to their long term relationship: according to estimates given here, a 10%
rise in the real oil price leads, ceteris paribus , to a real depreciation of the euro against the dollar of 9.4%. In November 2004, the
price of oil in euros should thus have been 37% above the actual price. It is possible that the evolution of other determinants of
the bilateral exchange rate overshadowed the impact of the oil price. But this does not rule out the possibility that a change in the
oil-dollar relationship itself has occurred. The cause for change does not seem to be the savings or import behaviours by OPEC
countries, which traditionally explain this relationship. In contrast, the emergence of China and its exchange rate regime could lie
at the heart of a new, negative causality, running from the dollar to the price of oil. |
Abstract |
