Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach,...

The authors document a robust and interesting relationship between the real domestic price of oil and real effective exchange rates for Germany, Japan and the United States. They explain why they think the real oil price captures exogenous terms-of-trade shocks and why such shocks could be the...

We examine whether a link exists between oil price shocks and the U.S. real effective exchange rate. The results show that the two variables appear to be cointegrated and that causality runs from oil prices to the exchange rate and not vice versa. The single-equation error-correction model...