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Commodity Export Boom and the Real Exchange Rate: The Money-Inflation Link

  • Sebastian Edwards

This paper analyzes the relation between exogenous changes in commodity export prices and the real exchange rate in a monetary economy. The traditional Dutch?Disease case is extended, and the monetary consequences of an export boom are explored. It is shown that commodity export booms can generate, in the short run, either an excess demand or an excess supply for money. In a monetary setting the short-run behavior of the real exchange rate can differ significantly from the more traditional Dutch-Disease case without money. The model is tested using data for Colombia.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1741.

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Date of creation: Oct 1985
Date of revision:
Publication status: published as Edwards, Sebastian. "Commodity Export Boom and the Real Exchange Rate: The Money-Inflation Link," Natural Resources and the Macroeconomy, eds. J. Peter Neeny and Sweder van Wijnbergen, Cambridge, MA: MIT Press, 1986.
Handle: RePEc:nbr:nberwo:1741
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Edwards, Sebastian, 1983. "The Short-Run Relation between Growth and Inflation in Latin America: Comment," American Economic Review, American Economic Association, vol. 73(3), pages 477-82, June.
  2. Maurice Obstfeld, 1984. "Capital Flows, the Current Account, and the Real Exchange Rate: Consequences of Liberalization and Stabilization," NBER Working Papers 1526, National Bureau of Economic Research, Inc.
  3. Neary, J Peter & van Wijnbergen, S, 1984. "Can an Oil Discovery Lead to a Recession? A Comment," Economic Journal, Royal Economic Society, vol. 94(374), pages 390-95, June.
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