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Will the Emergence of the Euro Affect World Commodity Prices?

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Listed:
  • Hong Liang
  • John T. Cuddington

Abstract

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.

Suggested Citation

  • Hong Liang & John T. Cuddington, 2000. "Will the Emergence of the Euro Affect World Commodity Prices?," IMF Working Papers 00/208, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/208
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    References listed on IDEAS

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    1. 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.
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    3. Paul Cashin & Hong Liang & C. John McDermott, 2000. "How Persistent Are Shocks to World Commodity Prices?," IMF Staff Papers, Palgrave Macmillan, vol. 47(2), pages 1-2.
    4. Carmen M. Reinhart & Peter Wickham, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 175-213, June.
    5. Carmen M. Reinhart, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 506-524, September.
    6. 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.
    7. 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 426-442, June.
    8. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, 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. Eduardo Borensztein & Carmen M. Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 236-261, June.
    11. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    12. 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 153-162, April.
    13. 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.
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    Cited by:

    1. Hali Edison & Paul Cashin & Hong Liang, 2006. "Foreign exchange intervention and the Australian dollar: has it mattered?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(2), pages 155-171.
    2. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 1-30, January-J.

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