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Real exchanges rates in commodity producing countries : A reappraisal

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  • BODART, Vincent

    ()

    (Université catholique de Louvain, Department of Economics and IRES, B-1348 Louvain-la-Neuve, Belgium)

  • CANDELON, Bertrand

    (University of Maastricht, Department of Economics, 6200 MD Maastricht, The Netherlands)

  • CARPANTIER, Jean - François

    ()

    (Université catholique de Louvain, Department of Economics, CORE and IRES, B-1348 Louvain-la-Neuve, Belgium)

Abstract

Commodity currency literature recently stressed the importance of commodity prices as a determinant of real exchange rates in developing countries (Cashin, Cespedes and Sahay 2004). We provide new empirical evidence on this issue by focusing on countries which are specialized in the ex-port of one leading commodity. For those countries, we investigate to which extent their real exchange rate is sensitive to price fluctuations of their dominant commodity. By using non-stationary panel techniques robust to cross-sectional-dependence, we find that the price of the dominant commodity has a significant long-run impact on the real exchange rate when the exports of the leading commodity have a share of at least 20 percent in the country’s total exports of merchandises. Our results also show that the larger the share, the larger the size of the impact.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011006.

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Date of creation: 01 Feb 2011
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Handle: RePEc:cor:louvco:2011006
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Keywords: real exchange rates; commodity prices; non-stationary panel;

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Find related papers by JEL classification:
  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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Cited by:

  1. Bodart, Vincent & Candelon, Bertrand & Carpantier, Jean-Francois, 2015. "Real exchanges rates, commodity prices and structural factors in developing countries," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 264-284.
  2. Magali Dauvin, 2013. "Energy Prices and the Real Exchange Rate of Commodity-Exporting Countries," Working Papers 2013.102, Fondazione Eni Enrico Mattei.
  3. Michel Beine & Serge Coulombe & Wessel N. Vermeulen, 2015. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," Economic Journal, Royal Economic Society, vol. 125(589), pages 1574-1615, December.
  4. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2013. "On the Impact of Oil Price Volatility on the Real Exchange Rate - Terms of Trade Nexus : Revisiting Commodity Currencies," Working Papers 2013-40, CEPII research center.
  5. Blaise Gnimassoun & Marc Joets & Tovonony Razafindrabe, 2016. "On the link between current account and oil price fluctuation in diversified economies: The case of Canada," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2016-08, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  6. Coudert, Virginie & Couharde, Cécile & Mignon, Valérie, 2015. "On the impact of volatility on the real exchange rate – terms of trade nexus: Revisiting commodity currencies," Journal of International Money and Finance, Elsevier, vol. 58(C), pages 110-127.
  7. Vincent Bodart & Jean-François Carpantier, 2014. "Real Exchange Rates and Skills," CREA Discussion Paper Series 14-03, Center for Research in Economic Analysis, University of Luxembourg.
  8. Melesse Tashu, 2015. "Drivers of Peru's Equilibrium Real Exchange Rate; Is the Nuevo Sol a Commodity Currency?," IMF Working Papers 15/26, International Monetary Fund.
  9. repec:ipg:wpaper:2014-046 is not listed on IDEAS
  10. Dongwon Lee & Yu-chin Chen, 2014. "What Makes a Commodity Currency?," Working Papers 201420, University of California at Riverside, Department of Economics.
  11. Bertrand Candelon, 2014. "Real Exchange rates, commodity prices and structural factors in developing countries," Working Papers 2014-46, Department of Research, Ipag Business School.

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