Spillover Effect of US Dollar Exchange Rate on Crude Oil Price

In economic and financial literature، the relationship between exchange rate of the US dollar and oil price is defined as a causality relationship between them which can be studied for long and short term periods. The mentioned relationship can be examined from a structural perspective by examining the demand and supply relationship for crude oil. On the other hand، information transmits reciprocally from one market to another. In order to investigate the mentioned relationships، this article has used the VECM-Multivariate GARCH method. The results of this study indicate that the causality relationship between the dollar market and crude price is unidirectional in the long term from the foreign exchange to the crude market، while there is no causality in the reverse direction. The relationship between the exchange rate of the dollar and crude prices is a negative one. Thus، while forecasting the long term price of crude and finding the elements which have long term effect on it، the trend rate of exchange of the US dollar has to be considered. In terms of the spillover effect or risk transfer، we recognize that there is no spillover effect from crude to exchange rate markets while fluctuations of exchange rate market have a spillover effect on crude markets and part of the crude oil risk comes from the volatility of the exchange rate market.