Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies
This paper investigates whether terms of trade have an impact on real exchange rates for commodity exporters and oil exporters. To this end, we estimate a long term relationship between the real effective exchange rate and economic fundamentals, including the commodity terms of trade. The estimation relies on panel cointegration techniques and covers annual data from 1980 to 2007. Our results show that real exchange rates co-move with commodity prices in the long run and respond to oil price somewhat less than to commodity prices. We also find that some pegged currencies have been driven away from their equilibria by wild fluctuations in the key currencies, on which they are anchored.
|Date of creation:||Dec 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 01 53 68 55 00
Fax: 33 01 53 68 55 01
Web page: http://www.cepii.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Virginie Coudert & Cécile Couharde, 2008.
"Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries,"
2008-07, CEPII research center.
- Virginie Coudert & Cécile Couharde, 2009. "Currency Misalignments and Exchange Rate Regimes in Emerging and Developing Countries," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 121-136, 02.
- Clark, Peter B. & MacDonald, Ronald, 2004.
"Filtering the BEER: A permanent and transitory decomposition,"
Global Finance Journal,
Elsevier, vol. 15(1), pages 29-56.
- Peter B. Clark & Ronald MacDonald, 2000. "Filtering the Beer; A Permanent and Transitory Decomposition," IMF Working Papers 00/144, International Monetary Fund.
- Korhonen, Iikka & Juurikkala, Tuuli, 2007. "Equilibrium exchange rates in oil-dependent countries," BOFIT Discussion Papers 8/2007, Bank of Finland, Institute for Economies in Transition.
- Guillermo A. Calvo & Carmen M. Reinhart, 2002.
"Fear Of Floating,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 379-408, May.
- Kenneth W. Clements & Renee Fry, 2006.
"Commodity Currencies And Currency Commodities,"
CAMA Working Papers
2006-19, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Christophe Hurlin, 2005. "Un test simple de l'hypothèse de non-causalité dans un modèle de panel hétérogène," Revue économique, Presses de Sciences-Po, vol. 56(3), pages 799-809.
- Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
- Todd Schneider & Nabil Ben Ltaifa & Faisal Ahmed & Saade Chami, 2007. "Yemen; Exchange Rate Policy in the Face of Dwindling Oil Exports," IMF Working Papers 07/5, International Monetary Fund.
- Lutz Kilian & Alessandro Rebucci & Nikola Spatafora, 2007.
"Oil Shocks and External Balances,"
562, Research Seminar in International Economics, University of Michigan.
- Paul Cashin & Luis Felipe Céspedes & Ratna Sahay, 2003.
"Commodity Currencies and the Real Exchange Rate,"
Working Papers Central Bank of Chile
236, Central Bank of Chile.
- Jose De Gregorio & Holger C. Wolf, 1994.
"Terms of Trade, Productivity, and the Real Exchange Rate,"
94-19, New York University, Leonard N. Stern School of Business, Department of Economics.
- Jose De Gregorio & Holger C. Wolf, 1994. "Terms of Trade, Productivity, and the Real Exchange Rate," NBER Working Papers 4807, National Bureau of Economic Research, Inc.
- Luca Antonio Ricci & Jaewoo Lee & Gian-Maria Milesi-Ferretti, 2008.
"Real Exchange Rates and Fundamentals; A Cross-Country Perspective,"
IMF Working Papers
08/13, International Monetary Fund.
- Luca Antonio Ricci & Gian Maria Milesi‐Ferretti & Jaewoo Lee, 2013. "Real Exchange Rates and Fundamentals: A Cross‐Country Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(5), pages 845-865, 08.
- Louis Dorrance Johnston & Menzie David Chinn, 1997.
"Real Exchange Rate Levels, Productivity and Demand Shocks; Evidence From a Panel of 14 Countries,"
IMF Working Papers
97/66, International Monetary Fund.
- Menzie Chinn & Louis Johnston, 1996. "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," NBER Working Papers 5709, National Bureau of Economic Research, Inc.
- Agnès Bénassy-Quéré & Valérie Mignon & Alexis Penot, 2005.
"China and the Relationship Between the Oil Price and the Dollar,"
2005-16, CEPII research center.
- Benassy-Quere, Agnes & Mignon, Valerie & Penot, Alexis, 2007. "China and the relationship between the oil price and the dollar," Energy Policy, Elsevier, vol. 35(11), pages 5795-5805, November.
- Chen, Shiu-Sheng & Chen, Hung-Chyn, 2007. "Oil prices and real exchange rates," Energy Economics, Elsevier, vol. 29(3), pages 390-404, May.
- Balazs Egert & Carol Leonard, 2008.
"Dutch Disease Scare in Kazakhstan: Is it real?,"
Open Economies Review,
Springer, vol. 19(2), pages 147-165, April.
- Balazs Egert & Carol S. Leonard, 2007. "Dutch Disease Scare in Kazakhstan: Is it real?," CESifo Working Paper Series 1961, CESifo Group Munich.
- Balázs Égert & Carol S. Leonard, 2007. "Dutch Disease Scare in Kazakhstan: Is It Real?," William Davidson Institute Working Papers Series wp866, William Davidson Institute at the University of Michigan.
- Égert , Balázs & Leonard, Carol S., 2007. "Dutch disease scare in Kazakhstan: Is it real?," BOFIT Discussion Papers 9/2007, Bank of Finland, Institute for Economies in Transition.
- Peter Isard, 2007. "Equilibrium Exchange Rates; Assessment Methodologies," IMF Working Papers 07/296, International Monetary Fund.
- Ronald Macdonald & Luca Antonio Ricci, 2004.
"Estimation Of The Equilibrium Real Exchange Rate For South Africa,"
South African Journal of Economics,
Economic Society of South Africa, vol. 72(2), pages 282-304, 06.
- Ronald MacDonald & Luca Antonio Ricci, 2003. "Estimation of the Equilibrium Real Exchange Rate for South Africa," IMF Working Papers 03/44, International Monetary Fund.
- Rautava, Jouko, 2004. "The role of oil prices and the real exchange rate in Russia's economy--a cointegration approach," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 315-327, June.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
- Peter Pedroni, 2004.
"Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis,"
Department of Economics Working Papers
2004-15, Department of Economics, Williams College.
- Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June.
- Virginie Coudert & Valérie Mignon & Alexis Penot, 2008. "Oil Price and the Dollar," Post-Print halshs-00353404, HAL.
- International Monetary Fund, 2003. "The Equilibrium Real Exchange Rate in a Commodity Exporting Country; The Case of Russia," IMF Working Papers 03/93, International Monetary Fund.
- Nelson C. Mark & Donggyu Sul, 2002.
"Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand,"
NBER Technical Working Papers
0287, National Bureau of Economic Research, Inc.
- Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December.
- Rebecca L Driver & Peter F Westaway, 2005. "Concepts of equilibrium exchange rates," Bank of England working papers 248, Bank of England.
- Amano, Robert A. & van Norden, Simon, 1995. "Terms of trade and real exchange rates: the Canadian evidence," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 83-104, February.
- Bassem Kamar & Samy Ben Naceur, 2007. "Gcc Monetary Union and the Degree of Macroeconomic Policy Coordination," IMF Working Papers 07/249, International Monetary Fund.
- Ronald MacDonald, 1997. "What Determines Real Exchange Rates? The Long and Short of it," IMF Working Papers 97/21, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:cii:cepidt:2008-32. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.