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Commodity Currencies And Currency Commodities

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  • Kenneth W. Clements
  • Renee Fry

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Abstract

There is a large literature on the influence of commodity prices on the currencies of countries with a large commodity-based export sector such as Australia, New Zealand and Canada ("commodity currencies"). There is also the idea that because of pricing power, the value of currencies of certain commodity-producing countries affects commodity prices, such as metals, energy, and agricultural-based products ("currency commodities"). This paper merges these two strands of the literature to analyse the simultaneous workings of commodity and currency markets. We implement the approach by using the Kalman filter to jointly estimate the determinants of the prices of these currencies and commodities. Included in the specification is an allowance for spillovers between the two asset types. The methodology is able to determine the extent that currencies are indeed driven by commodities, or that commodities are driven by currencies, over the period 1975 to 2005.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-19.

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Length: 65 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:een:camaaa:2006-19

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References

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Cited by:
  1. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2011. "Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 34(9), pages 1557-1592, 09.
  2. Baur, Dirk G., 2011. "Explanatory mining for gold: Contrasting evidence from simple and multiple regressions," Resources Policy, Elsevier, Elsevier, vol. 36(3), pages 265-275, September.
  3. Kenneth W. Clements & Renee Fry, 2006. "Commodity Currencies and Currency Commodities," Economics Discussion / Working Papers, The University of Western Australia, Department of Economics 06-17, The University of Western Australia, Department of Economics.
  4. Clements, Kenneth & Lan, Yihui & Roberts, John, 2008. "Exchange-rate economics for the resources sector," Resources Policy, Elsevier, Elsevier, vol. 33(2), pages 102-117, June.
  5. Mardi Dungey & Renée Fry-McKibbin & Verity Linehan, 2013. "Chinese Resource Demand and the Natural Resource Supplier," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2013-54, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  6. Roache, Shaun K. & Rossi, Marco, 2010. "The effects of economic news on commodity prices," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 50(3), pages 377-385, August.
  7. Pukthuanthong, Kuntara & Roll, Richard, 2011. "Gold and the Dollar (and the Euro, Pound, and Yen)," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(8), pages 2070-2083, August.
  8. Shaun K. Roache & Marco Rossi, 2009. "The Effects of Economic Newson Commodity Prices," IMF Working Papers, International Monetary Fund 09/140, International Monetary Fund.
  9. Mark, Joy, 2011. "Gold and the US dollar: Hedge or haven?," Finance Research Letters, Elsevier, Elsevier, vol. 8(3), pages 120-131, September.
  10. Wang, Kuan-Min & Lee, Yuan-Ming, 2011. "The yen for gold," Resources Policy, Elsevier, Elsevier, vol. 36(1), pages 39-48, March.

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