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This thesis focuses on the relationships between oil prices fluctuations and trade-related variables. There are 6 chapters. The introductory chapter sets the scene while chapter 2 discusses the theory for economics of non-renewable resources. This is followed by three substantive chapters which focus on three different aspects of the thesis: the oil price-RCA relationship, the oil price-exchange rate relationship and the oil price-output growth relationship. Chapter 6 concludes the thesis. Chapter 3 quantifies the effects of oil price fluctuations on revealed comparative advantage (RCA) for 36 manufacturing commodities of 167 countries from 1990 to 2005. Using Zellner's (1962) seemingly unrelated regression (SURE) model, the chapter finds that oil price fluctuations negatively affect middle-income economies and net oil-exporting countries' RCA more than high-income economies and net oil-importing countries. Chapter 4 explores the long run effects of real oil price and real interest rate differential on real exchange rate for a monthly panel of 8 countries from 1980 to 2008. Using the mean group estimator, the chapter finds no statistically significant relationship between real oil price and real exchange rate for oil-importing and oil- exporting countries. However, when using the pooled mean group estimator, the chapter finds a positive and statistically significant impact of real oil price on real exchange rate for five net oil importing countries, implying that increase in oil price leads to real exchange rate depreciation . . Chapter 5 investigates the asymmetric effects of oil pnce shocks on real economic activities in Malaysia from 1991 to 2007. Using an unrestricted Vector Auto Regressive (V AR) method, mixed results are obtained. Evidence of a symmetric relationship between oil prices and economic activities is obtained from the impulse response function (IRFs). However, the variance decomposition analyses VAR suggest that oil prices have different impacts on economic activities when they increase than when they fall.

The first essay of the thesis investigates currency misalignments and their magnitude for the Chinese yuan (CNY), the Japanese yen (JPY) and the British pound (GBP). We employ the model-based exchange market pressure. Conversion factors required to estimate the pressure on the currency are computed using a time-varying coefficient regression. We found persistent and significant undervaluation of CNY. For the JPY, the currency pressure shows predominantly low values with occasional high pressure in both directions. And finally, the results indicate very low pressure on the GBP. At the intuitive level, the outcome of the GBP suggests that there exist more effective leverages to influence the exchange rate rather than bold interventions in the exchange market. Many empirical studies on forward rates showed that the spot difference and forward premium are negatively related. However, this violates the forward rate unbiasedness theory. Possible explanation of the forward premium puzzle is due to the non-linearities in the series and misspecification. In the second essay we employed a time-varying coefficient technique as an alternative to the standard regression. This methodology estimates bias-free coefficients and thus should provide better estimates of the link between spot and forward rates. The findings of this essay strongly support the forward rate unbiasedness hypothesis. In addition, our results do not violate the efficient market theory. The final essay of the thesis investigates symmetry and proportionality conditions of PPP in nine EU countries using generalised cointegration techniques. Total effect and true (bias-free) effect coefficients of PPP are analysed. The outcome of the total effect coefficients demonstrated that the exchange rate is inversely related to the prices for some of the countries. Surprisingly, the movement of the monthly estimates of the total effect are symmetrical; however, this symmetry is not as usually thought but the movement of the coefficients are symmetrical. We could possibly conjecture that the coefficients of total effect could be not definable. We also made an attempt to remove biases from the total effect coefficients in order to find strict proportionality and consequently cointegratedness of the true values. The results show that the averages of the true coefficients satisfy both the strict proportionality and symmetry conditions. However, monthly bias-free coefficients significantly deviate from unity leading to the rejection of PPP in the short run. Therefore, our result can be interpreted as in favour of the long run PPP while in the short run it is violated.

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Exchange rate volatility has significant effects on decisions made by many economic agents who participate in foreign exchange markets, most notably exporters, importers and foreign investors. The literature in the field of international macroeconomics has mainly concentrated on changes in the level of exchange rates rather than exchange rate volatility itself. Since we believe that the second moment of the exchange rate should be given more attention, we directly investigate the relationship between exchange rate volatility and macroeconomic fundamentals in developed as well as developing countries. For this reason, from the traditional exchange rate models which relate exchange rate levels to a set of fundamentals, we derive equations that can be used to examine the determinants of exchange rate volatility. We also investigate the possible impact of different variability measures and data frequencies. Our empirical results are generated from a very recently developed approach to cointegration analysis, namely, the bounds testing method of Pesaran et al., 2001. Using four industrialized countries and four less developed countries over the period 1973 to 1998, we found that the volatility of some macroeconomic fundamentals does indeed have a significant impact on the volatility of exchange rates in both groups of countries. Finally, whilst different variability proxies and data frequencies slightly affect the signs of significant variables, they do highly impact on the significance and weight that should be given to the relevant fundamental.

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In recent years, because of the extraordinary growth speed and the pace of development with the high yield of investment, China, is playing one of the most important strategic roles on the world economic stage. The position and standing of the Chinese currency, the Renminbi, has been one of the most popular and continuous topic discussing throughout the world. China has for a long time complained about the manipulation of exchange rates of its currency Renminbi, citing the raising of these issues by multilateral forums such as IMF and the G20, who urge China to raise RMB rates. However, the reactions and attitude of Beijing have been unpredictable. In the empirical researches of the Chinese currency, there is hardly any which attempt to quantify the situation. It is therefore important and necessary to fill this research gap by establishing econometric models for forecasting the future trends of the Renminbi. This PhD research focuses on forecasting the future trends of Chinese currency based on an analysis of Chinese exchange markets and the macroeconomic environments. This research focuses on analysing the Chinese foreign trade, exchange market, policies, currency prices both qualitatively and quantitatively, to try to find out what are the connections between micro and macroeconomic phenomena and estimating them with economic models, in order to forecast exchange rate trends and the future state of financial markets. This study will start by giving an introduction to the Chinese monetary system and foreign exchange markets at different time periods. Through the research, significant relationships of currency prices, foreign trade exports, foreign direct investments and the GDP have been found. When real effective real exchange rates rise, the forecast of net export in the future 5 years will fall, so will the foreign direct investments. At the same time, it will stimulate increases on GDP and domestic demands. These study also researches on global credit and financial crisis occurred in 2008 followed by a long-term global range recession and find out the essential reason of it was global imbalances between the economies of eastern and western countries.