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Primary Commodity Prices, the Business Cycle and the Real Exchange Rate of the Dollar

Author

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  • van Wijnbergen, Sweder

Abstract

An empirical stylized fact is that primary exporters' terms of trade worsen when the dollar appreciates and improve when the dollar depreciates. In our theoretical analysis, we demonstrate that an appreciation of the dollar will worsen a primary exporter's terms of trade, the smaller the United States share in the world market for the primary commodity, the lower the United States demand elasticity for that good, and the larger the United States share in the exporter's imports. We present empirical findings that support the theoretical analysis. We also find strong evidence of the cyclical sensitivity and the secular decline of real commodity prices.

Suggested Citation

  • van Wijnbergen, Sweder, 1985. "Primary Commodity Prices, the Business Cycle and the Real Exchange Rate of the Dollar," CEPR Discussion Papers 90, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:90
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    Citations

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    Cited by:

    1. Hyeongwoo Kim & Jintae Kim, 2016. "Price Adjustment to the Exchange Rate Shock in World Commodity Markets," Auburn Economics Working Paper Series auwp2016-01, Department of Economics, Auburn University.
    2. Walter C. Labys & Alfred Maizels, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Paper Series wp-1990-088, World Institute for Development Economic Research (UNU-WIDER).
    3. Hyeongwoo Kim & Jintae Kim, 2015. "The Heterogeneous Responses of the World Commodity Prices to Exchange Rate Shocks," Auburn Economics Working Paper Series auwp2015-18, Department of Economics, Auburn University.
    4. Cristini, Annalisa, 1995. "Primary commodity prices and the OECD economic performance," European Economic Review, Elsevier, vol. 39(1), pages 83-98, January.

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