This paper investigates the relationship between energy prices and the real effective exchange rate of commodityexporting countries. We consider two sets of countries: 10 energyexporting and 23 commodityexporting countries over the period 1980–2011. Estimating a panel cointegrating relationship between the real exchange rate and its fundamentals, we provide evidence for the existence of “energy currencies”. Relying on the estimation of panel smooth transition regression (PSTR) models, we show that there exists a certain threshold beyond which the real effective exchange rate of both energy and commodity exporters reacts to oil prices, through the termsoftrade. More specifically, when oil price variations are low, the real effective exchange rates are not determined by termsoftrade but by other usual fundamentals. Nevertheless, when the oil market is highly volatile, currencies follow an “oil currency” regime, termsoftrade becoming an important driver of the real exchange rate. 
Abstract
