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Will the Emergence of the Euro Affect World Commodity Prices?

  • Hong Liang
  • John T. Cuddington

This study provides evidence that episodes of internal stability of exchange rates among the 11 Euro countries during 1957-98 were associated with periods of lower real commodity price volatility. These stabilizing effects are statistically significant for fertilizer, metals, petroleum, and cereals. A reasonable inference, therefore, is that the establishment of the Euro on January 1, 1999, should be expected to contribute to reduced volatility of world commodity prices, other things equal, although the impacts are likely to be modest.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/208.

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Length: 32
Date of creation: 01 Dec 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/208
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  1. Reinhart, Carmen & Borensztein, Eduardo, 1994. "The Macroeconomic Determinants of Commodity Prices," MPRA Paper 6979, University Library of Munich, Germany.
  2. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
  3. Cuddington, John T & Urzua, Carlos M, 1989. "Trends and Cycles in the Net Barter Terms of Trade: A New Approach," Economic Journal, Royal Economic Society, vol. 99(396), pages 426-42, June.
  4. Peter Wickham & Carmen Reinhart, 1994. "Commodity Prices; Cyclical Weakness or Secular Decline?," IMF Working Papers 94/7, International Monetary Fund.
  5. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-62, April.
  6. Reinhart, Carmen, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," MPRA Paper 8197, University Library of Munich, Germany.
  7. Beckerman, Wilfred & Jenkinson, Tim, 1986. "What Stopped the Inflation? Unemployment of Commodity Prices?," Economic Journal, Royal Economic Society, vol. 96(381), pages 39-54, March.
  8. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  9. Bui, Nhuong & Pippenger, John, 1990. "Commodity prices, exchange rates and their relative volatility," Journal of International Money and Finance, Elsevier, vol. 9(1), pages 3-20, March.
  10. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  11. Cuddington, John T., 1992. "Long-run trends in 26 primary commodity prices : A disaggregated look at the Prebisch-Singer hypothesis," Journal of Development Economics, Elsevier, vol. 39(2), pages 207-227, October.
  12. Hong Liang & C. John McDermott & Paul Cashin, 1999. "How Persistent Are Shocks to World Commodity Prices?," IMF Working Papers 99/80, International Monetary Fund.
  13. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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