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Keynes, Cocoa, and Copper


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  • Ratna Sahay
  • Luis Felipe Céspedes
  • Paul Cashin


This paper examines whether the real exchange rates of commodity-exporting countries and the real prices of their commodity exports move together over time. Using IMF data on the world prices of 44 commodities and national commodity export shares, we construct new monthly indices of national commodity export prices for 58 countries over 1980-2002. A long-run relationship between real exchange rates and real commodity prices is found for about two-fifths of the commodity-exporting countries. Also, the behavior of the real exchange rate of commodity currencies is found to be independent of the nominal exchange rate regime. The average half-life of adjustment of real exchange rates to commodity-price-augmented purchasing power parity is found to be about eight months, which is much shorter than Rogoff’s (1996) consensus estimate of three to five years, and provides an important missing piece of the PPP puzzle.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/223.

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Length: 63
Date of creation: 01 Dec 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/223

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Postal: International Monetary Fund, Washington, DC USA
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Keywords: Commodity prices; Purchasing power parity; exchange rate; real exchange rate; exchange rates; real exchange rates; reer; commodity exports; exchange rate regimes; commodity export; nominal exchange rate; exporting countries; commodity-exporting countries; export prices; export earnings; real effective exchange rate; export price; effective exchange rate; exchange rate regime; export price indices; exporters; total exports; total export; export price index; exchange rate determination; exchange rate movements; real exchange rate movements; manufactured exports; nominal effective exchange rate; nominal exchange rates; diversified export base; export shares; export base; bilateral exchange rates; classification of exchange rate; export receipts; commodity exporters; fixed nominal exchange rate; quantity of exports; currency boards; flexible exchange rate; export data; foreign exchange; exchange rate policy; exchange rate revaluation; exchange arrangements; exchange rate depreciation; national export; export share; exporting developing countries; effective exchange rates; exports of goods; export baskets; exchange restrictions; exchange rate variability; exchange rate appreciation; exchange rate targeting; value of exports; real exchange rate fluctuations; foreign exchange reserves; export income; fixed exchange rate; fish exports; alternative exchange rate regimes; exchange rate changes; real exchange rate appreciation; parallel exchange rate; real exchange rate changes; exchange rate fluctuations; exchange rate adjustments; exchange rate policies; fuel exporters; exchange rate channel; real exchange rate overvaluations; export basket; export of commodities; producer prices; exchange market intervention; principal exports; exported goods; unit labor costs; exchange reserves; average real exchange rate; exchange rate misalignment; open economy macroeconomics; alternative exchange rate; exchange rate shocks; fixed exchange rate regimes; export unit; real exchange rate depreciation; exchange rate pass; flexible exchange rate regime; share of exports; exchange rate arrangements; price of exports; flexible exchange rate regimes; exchange rate pegs; exporting country; exchange rate flexibility; export commodity; export price data; exchange rate indicators; bilateral real exchange rate; history of exchange rate;


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