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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.

Suggested Citation

  • Harry Bloch & A. Michael Dockery & David Sapsford, 2006. "Commodity Prices and the Dynamics of Inflation in Commodity-Exporting Nations: Evidence from Australia and Canada," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 97-109, September.
  • Handle: RePEc:bla:ecorec:v:82:y:2006:i:s1:p:s97-s109
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    Citations

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    Cited by:

    1. 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.
    2. Calista Cheung, 2009. "Are Commodity Prices Useful Leading Indicators of Inflation?," Discussion Papers 09-5, Bank of Canada.
    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. Nikolaos Sariannidis & Grigoris Giannarakis & Eleni Zafeiriou & Ioannis Billias, 2016. "The Effect of Crude Oil Price Moments on Socially Responsible Firms in Eurozone," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 356-363.
    5. Kuhanathan Ano Sujithan & Sanvi Avouyi-Dovi & Lyes Koliai, 2013. "Does Monetary Policy Respond to Commodity Price Shocks?," Post-Print hal-01511915, HAL.
    6. Bürgi Bonanomi, Elisabeth & Elsig, Manfred & Espa, Ilaria, 2015. "The Commodity Sector and Related Governance Challenges from a Sustainable Development Perspective: The Example of Switzerland Current Research Gaps," Papers 865, World Trade Institute.
    7. Chang, Kuang-Liang, 2014. "The symmetrical and positive relationship between crude oil and nominal exchange rate returns," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 266-284.
    8. repec:dau:papers:123456789/11718 is not listed on IDEAS
    9. 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.

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