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Commodity Prices and the Dynamics of Inflation in Commodity-Exporting Nations: Evidence from Australia and Canada

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  • HARRY BLOCH
  • A. MICHAEL DOCKERY
  • DAVID SAPSFORD

Abstract

A commodity-price boom is under way. What does this boom mean for inflation in countries with substantial net commodity exports? The answer depends on movements in commodity prices, changes in foreign exchange rates and the determinants of domestic price inflation. We estimate equations to provide indications of the strength of each of these forces for both Australia and Canada. The results show that world commodity prices move pro-cyclically with world industrial production and that rates of change in commodity prices are directly related to domestic inflation in both countries. However, there is an offsetting impact of exchange-rate changes, which is strong enough in the case of Australia, but not Canada, to substantially eliminate the inflationary impact of a commodity-price boom. Copyright © 2006 The Economic Society of Australia.

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal Economic Record.

Volume (Year): 82 (2006)
Issue (Month): s1 (09)
Pages: S97-S109

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Handle: RePEc:bla:ecorec:v:82:y:2006:i:s1:p:s97-s109

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Cited by:
  1. Ano Sujithan, Kuhanathan & Koliai, Lyes & Avouyi-Dovi, Sanvi, 2013. "Does Monetary Policy Respond to Commodity Price Shocks?," Economics Papers from University Paris Dauphine 123456789/11718, Paris Dauphine University.
  2. Rafiq, Shuddhasawtta & Salim, Ruhul & Bloch, Harry, 2009. "Impact of crude oil price volatility on economic activities: An empirical investigation in the Thai economy," Resources Policy, Elsevier, vol. 34(3), pages 121-132, September.
  3. Acharya, Ram N. & Gentle, Paul F. & Mishra, Ashok K. & Paudel, Krishna P., 2008. "Examining The Crb Index As An Indicator For U.S. Inflation," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6760, Southern Agricultural Economics Association.
  4. A.F.M. Kamrul Hassan & Ruhul A. Salim, 2011. "Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 41(3), pages 205-216, December.
  5. Alisson Curátola de Melo, 2013. "Brazil’s Commodity Price Index," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the Sixth IFC Conference on "Statistical issues and activities in a changing environment", Basel, 28-29 August 2012., volume 36, pages 217-227 Bank for International Settlements.

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