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Commodity Currencies and Currency Commodities

Author

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  • Kenneth W. Clements

    () (UWA Business School, The University of Western Australia)

  • Renee Fry

    (Centre for Applied Macroeconomic Analysis, The Australian National University & Cambridge Endowment for Research in Finance, The University of Cambridge)

Abstract

There is a large literature on the influence of commodity prices on the currencies of countries with a large commodity-based export sector such as Australia, New Zealand and Canada (“commodity currencies”). There is also the idea that because of pricing power, the value of currencies of certain commodity-producing countries affects commodity prices, such as metals, energy, and agricultural-based products (“currency commodities”). This paper merges these two strands of the literature to analyse the simultaneous workings of commodity and currency markets. We implement the approach by using the Kalman filter to jointly estimate the determinants of the prices of these currencies and commodities. Included in the specification is an allowance for spillovers between the two asset types. The methodology is able to determine the extent that currencies are indeed driven by commodities, or that commodities are driven by currencies, over the period 1975 to 2005.

Suggested Citation

  • Kenneth W. Clements & Renee Fry, 2006. "Commodity Currencies and Currency Commodities," Economics Discussion / Working Papers 06-17, The University of Western Australia, Department of Economics.
  • Handle: RePEc:uwa:wpaper:06-17
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    File URL: http://www.biz.uwa.edu.au/home/research/discussionworking_papers/economics/2005?f=147001
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    Cited by:

    1. Roache, Shaun K. & Rossi, Marco, 2010. "The effects of economic news on commodity prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 50(3), pages 377-385, August.
    2. Shaun K. Roache & Marco Rossi, 2009. "The Effects of Economic News on Commodity Prices; Is Gold Just Another Commodity?," IMF Working Papers 09/140, International Monetary Fund.
    3. Virginie Coudert & Cécile Couharde & Valérie Mignon, 2011. "Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies," The World Economy, Wiley Blackwell, vol. 34(9), pages 1557-1592, September.
    4. Nicolaas Groenewold & James E.H. Paterson, 2013. "Stock Prices and Exchange Rates in Australia: Are Commodity Prices the Missing Link?," Australian Economic Papers, Wiley Blackwell, vol. 52(3-4), pages 159-170, December.
    5. Clements, Kenneth W. & Fry, Renée, 2008. "Commodity currencies and currency commodities," Resources Policy, Elsevier, vol. 33(2), pages 55-73, June.
    6. Mardi Dungey & Renee Fry-McKibbin & Verity Linehan, 2014. "Chinese resource demand and the natural resource supplier," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 167-178, January.
    7. Clements, Kenneth & Lan, Yihui & Roberts, John, 2008. "Exchange-rate economics for the resources sector," Resources Policy, Elsevier, vol. 33(2), pages 102-117, June.
    8. Vespignani, Joaquin & Kang, Wensheng & Ratti, Ronald, 2018. "Global Commodity Prices and Global Stock Volatility Shocks," MPRA Paper 84250, University Library of Munich, Germany.
    9. repec:ijc:ijcjou:y:2017:q:2:a:4 is not listed on IDEAS
    10. Magali Dauvin, 2014. "Energy prices and the real exchange rate of commodity-exporting countries," International Economics, CEPII research center, issue 137, pages 52-72.
    11. repec:eee:jimfin:v:79:y:2017:i:c:p:203-217 is not listed on IDEAS
    12. Andreas Breitenfellner & Jesus Crespo Cuaresma, 2008. "Crude Oil Prices and the USD/EUR Exchange Rate," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
    13. repec:eee:eneeco:v:66:y:2017:i:c:p:399-410 is not listed on IDEAS
    14. Muammer Wali & Meher Manzur, 2013. "Exchange Rate Volatility Before and After the Float," The World Economy, Wiley Blackwell, vol. 36(8), pages 1091-1097, August.
    15. Mark, Joy, 2011. "Gold and the US dollar: Hedge or haven?," Finance Research Letters, Elsevier, vol. 8(3), pages 120-131, September.
    16. Wang, Kuan-Min & Lee, Yuan-Ming, 2011. "The yen for gold," Resources Policy, Elsevier, vol. 36(1), pages 39-48, March.
    17. Pukthuanthong, Kuntara & Roll, Richard, 2011. "Gold and the Dollar (and the Euro, Pound, and Yen)," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 2070-2083, August.
    18. Baur, Dirk G., 2011. "Explanatory mining for gold: Contrasting evidence from simple and multiple regressions," Resources Policy, Elsevier, vol. 36(3), pages 265-275, September.
    19. Emanuel Kohlscheen & Fernando Avalos & Andreas Schrimpf, 2017. "When the Walk Is Not Random: Commodity Prices and Exchange Rates," International Journal of Central Banking, International Journal of Central Banking, vol. 13(2), pages 121-158, June.
    20. Nicholas Apergis & Sofia Eleftheriou & Dimitrios Voliotis, 2017. "Asymmetric Spillover Effects between Agricultural Commodity Prices and Biofuel Energy Prices," International Journal of Energy Economics and Policy, Econjournals, vol. 7(1), pages 166-177.

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