Impact of Oil Revenues on Exchange Rate in Sudan 2003 - 2014

Abstract

The country has experienced a decline in the exchange rate since the global financial crisis in 2008 when the price of oil dropped and, after the secession of South Sudan in July 2011. Therefore, this research titled impact of oil revenues on the exchange rate came and, aimed to identify the impact of oil revenues on the exchange rate in Sudan. Assuming when decline in revenue of exports "or reserve of hard currency" occur the demand for foreign currency increases, and the exchange rate depreciates. This research used the monthly data from January 2003 to September 2014 taken from the Central Bank of Sudan. South Sudan Secession represented a dummy variable. The research concluded that cointegration does not exist between the series according to Engle-Granger, Johanson and Bounds tests, so long run relation is not possible to examine for the absence of cointegration, Vector Autoregressive model „VAR‟ was applied for short-run relations. The most important findings are that; decrease in oil revenues and secession of South Sudan have a significant impact on the exchange rate and leading depreciation of local currency. And finally, the research recommended to develop the country production capacities, review the economic structure and deal with the economic problems from its roots by setting flexible economic policies. Key Words: Sudan, Exchange Rate, Oil Revenues, Co-Integration, Error Correction Model “ECM” and Vector Autoregressive Model “VAR”.