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• Robert George Gregory

The paper examines the desirability of exchange rate management in a commodity-exporting country, in which the terms of trade are driven by the world commodity price cycle. When the authorities are assumed to pursue an inflation objective, the usefulness of managing the rate depends on the relative importance of monetary versus terms of trade shocks. Empirical evidence suggests that floating rate regimes will normally be preferred for countries like Australia and New Zealand, although circumstances can be envisaged in which either leaning-against-the-wind or leaning-with-the-wind policies are required. A review of experience since the Korean War boom suggests that attempts to fix the exchange rate in the face of the commodity cycle are likely to be associated with inflation problems, while labour market asymmetries can lead to resource misallocation and to pressures for the protection of the non-commodity traded goods sector ...

Ce papier examine si la gestion du taux de change est désirable pour un pays exportateur de produits de base, dans lequel les termes de l'échange sont commandés par le cycle du prix mondial de ces produits. Si es autorités poursuivent un objectif d'inflation, l'intérêt de gérer le taux de change dépend de l'importance relative des chocs monétaires comparée aux chocs commerciaux. L'analyse suggère qu'un régime de changes flottants sera normalement préféré pour des pays comme l'Australie ou la Nouvelle-Zélande, encore que des circonstances peuvent être envisagées dans lesquelles une politique de taux de change devient nécessaire. L'expérience de la période d'expansion de la guerre de Corée suggère que les tentatives de fixer le taux de change face au cycle des produits de base seront vraisemblablement accompagnées de problèmes inflationnistes, tandis que les assymétries du marché du travail peuvent conduire à une mauvaise allocation des ressources et à des pressions pour protéger le ...

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Paper provided by OECD Economics Department in its series OECD Economics Department Working Papers with number 83.

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Date of creation: Jul 1990
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Handle: RePEc:oec:ecoaaa:83-en

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1. David Gruen & Jacqueline Dwyer, 1995. "Are Terms of Trade Rises Inflationary?," RBA Research Discussion Papers rdp9508, Reserve Bank of Australia. [Downloadable!]
2. Shakila Aruman & Mardi Dungey, 2001. "A Perspective on Modelling the Real Trade Weighted Index Since the Float," CEPR Discussion Papers 435, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
3. Satish Chand, 2001. "How misaligned is the Australian real exchange rate?," International and Development Economics Working Papers idec01-2, International and Development Economics. [Downloadable!]
   Other versions:
   • Satish Chand, 2001. "How misaligned is the Australian real exchange rate?," Macroeconomics Working Papers 559, East Asian Bureau of Economic Research. [Downloadable!]
4. David Gruen & Tro Kortian, 1996. "Why Does the Australian Dollar Move so Closely With the Terms of Trade?," RBA Research Discussion Papers rdp9601, Reserve Bank of Australia. [Downloadable!]
5. Jacqueline Dwyer & Philip Lowe, 1993. "Alternative Concepts of the Real Exchange Rate: A Reconciliation," RBA Research Discussion Papers rdp9309, Reserve Bank of Australia. [Downloadable!]

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