This study aims at investigating the following: first, whether the
U.S exchange rate has a negative effect on the price of crude oil
or not; second, whether there is a unidirectional relationship or
not that runs from the U.S dollar exchange rate to the price of
crude oil by conducting a Granger causality test; third, verify
whether there is a long- run relationship between our proposed
variables by conducting a co-integrated test by using the
Engle-Granger test. This study finds a significant negative
bivariate relation between the price of crude oil and the U.S
dollar exchange rate when using monthly data. Furthermore, when
using the same annual values of the two variables, this study shows
that change of U.S dollar exchange rate does Granger cause the
change in the price of crude oil at 5% level of significance,
however, the oil price does not Granger cause change in U.S
exchange rate at 5% level of significance. Therefore, the existence
of a one way (unidirectional) effect is realized at 5% level of
significance, which runs from the U.S dollar exchange rate to the
price of crude oil.
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