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Trend of Commodity Prices and Exchange Rate in Australian Economy: Time Varying Parameter Model Approach

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  • Debasish Roy

    (Amity University)

  • Ramaprasad Bhar

    (The University of New South Wales)

Abstract

Here we investigate the relationship between export commodity prices and AUD/USD exchange rate fluctuation using time varying parameter model. Using monthly data for over 30 years we found that exchange rate is determined by commodity prices and Australian base metal indices is highly correlated with country’s exchange rate. We have considered linear Gaussian state space model where common variance is treated as a stochastic time varying variable which gets considered for modeling economic time series.

Suggested Citation

  • Debasish Roy & Ramaprasad Bhar, 2020. "Trend of Commodity Prices and Exchange Rate in Australian Economy: Time Varying Parameter Model Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 27(3), pages 427-437, September.
    • Handle: RePEc:kap:apfinm:v:27:y:2020:i:3:d:10.1007_s10690-020-09301-9
    DOI: 10.1007/s10690-020-09301-9
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    References listed on IDEAS

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    Cited by:

    1. Yıldırım, Durmuş Çağrı & Erdoğan, Fatma & Tarı, Elif Nur, 2022. "Time-varying volatility spillovers between real exchange rate and real commodity prices for emerging market economies," Resources Policy, Elsevier, vol. 76(C).
    2. Borkowski, Bolesław & Krawiec, Monika & Karwański, Marek & Szczesny, Wiesław & Shachmurove, Yochanan, 2021. "Modeling garch processes in base metals returns using panel data," Resources Policy, Elsevier, vol. 74(C).

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    More about this item

    Keywords

    Commodity indices; Exchange rate; Regression model; Time varying parameter;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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