IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/1083.html
   My bibliography  Save this paper

Commodity prices and the US Dollar

Author

Listed:
  • Daniel Rees

Abstract

In the aftermath of the Covid pandemic rising commodity prices went hand-in-hand with a strengthening US dollar. This was a sharp contrast to the usual relationship between commodity prices and the dollar. This paper presents evidence that post-Covid correlation patterns could become more common in the future. This conclusion rests on two observations. First, the US dollar exhibits a close and stable relationship with the US terms of trade. Second, the United States' shift from being a net oil importer to a net oil exporter means that higher commodity prices now tend to raise the US terms of trade, rather than lowering them. Changes in the relationship between commodity prices and the US dollar will have implications for commodity exporters and importers alike.

Suggested Citation

  • Daniel Rees, 2023. "Commodity prices and the US Dollar," BIS Working Papers 1083, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1083
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/work1083.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: https://www.bis.org/publ/work1083.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    2. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 707-734.
    3. Adrian Blundell-Wignall, 1993. "Introduction to The Exchange Rate, International Trade and the Balance of Payments," RBA Annual Conference Volume (Discontinued), in: Adrian Blundell-Wignall (ed.),The Exchange Rate, International Trade and the Balance of Payments, Reserve Bank of Australia.
    4. Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
    5. Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.
    6. Marc Klau & San Sau Fung, 2006. "The new BIS effective exchange rate indices," BIS Quarterly Review, Bank for International Settlements, March.
    7. Boris Hofmann & Ilhyock Shim & Hyun Song Shin, 2022. "Risk capacity, portfolio choice and exchange rates," BIS Working Papers 1031, Bank for International Settlements.
    8. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    9. Amano, Robert A. & van Norden, Simon, 1995. "Terms of trade and real exchange rates: the Canadian evidence," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 83-104, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ashima Goyal, 2023. "India's exchange rate regime under inflation targeting," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2023-015, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Iuga, Iulia Cristina & Mudakkar, Syeda Rabab & Dragolea, Larisa Loredana, 2024. "Agricultural commodities market reaction to COVID-19," Research in International Business and Finance, Elsevier, vol. 69(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nikhil Patel, 2016. "International Trade Finance and the Cost Channel of Monetary Policy in Open Economies," BIS Working Papers 539, Bank for International Settlements.
    2. Karsten Kohler & Engelbert Stockhammer, 2023. "Flexible exchange rates in emerging markets: shock absorbers or drivers of endogenous cycles?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 32(2), pages 551-572.
    3. Beckmann, Joscha & Belke, Ansgar & Dreger, Christian, 2017. "The relevance of international spillovers and asymmetric effects in the Taylor rule," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 162-170.
    4. Oscar Jorda & Alan Taylor & Sanjay Singh, 2019. "The Long-Run Effects of Monetary Policy," 2019 Meeting Papers 1307, Society for Economic Dynamics.
    5. Devereux, Michael B. & Young, Eric R. & Yu, Changhua, 2019. "Capital controls and monetary policy in sudden-stop economies," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 52-74.
    6. Maral Kichian & Ali Dib & Carlos de Resende, 2010. "Optimized Monetary Policy Rules in Multi-Sector Small Open Economies: The Role of Real Rigidities," 2010 Meeting Papers 184, Society for Economic Dynamics.
    7. Cuadra, Gabriel & Menna, Lorenzo, 2019. "Capital flows and the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 106(C), pages 1-1.
    8. Oscar Díaz Q. & Marco Laguna V., 2007. "Factores que explican la reducción de las tasas pasivas de interés en el sistema bancario boliviano," Monetaria, CEMLA, vol. 0(4), pages 331-366, octubre-d.
    9. Jeanne, Olivier & Son, Jeongwon, 2012. "To what extent are tariffs offset by exchange rates?," Economics Working Paper Archive 66656, The Johns Hopkins University,Department of Economics.
    10. Ṣebnem Kalemli-Özcan, 2019. "U.S. Monetary Policy and International Risk Spillovers," NBER Working Papers 26297, National Bureau of Economic Research, Inc.
    11. Linda S. Goldberg, 2022. "Global Liquidity: Drivers, Volatility and Toolkits," Speech 95155, Federal Reserve Bank of New York.
    12. Kamber, Gunes & McDonald, Chris & Sander, Nick & Theodoridis, Konstantinos, 2016. "Modelling the business cycle of a small open economy: The Reserve Bank of New Zealand's DSGE model," Economic Modelling, Elsevier, vol. 59(C), pages 546-569.
    13. Ramzi Issa & Robert Lafrance & John Murray, 2008. "The turning black tide: energy prices and the Canadian dollar," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 737-759, August.
    14. Kabaca, Serdar & Tuzcuoglu, Kerem, 2024. "International transmission of quantitative easing policies: Evidence from Canada," Journal of Economic Dynamics and Control, Elsevier, vol. 162(C).
    15. Xie, Oliver, 2024. "Financial Hedging and Optimal Currency of Invoicing," SocArXiv v8zdk, Center for Open Science.
    16. Nadezhda Ivanova & Mikhail Andreev & Andrey Sinyakov & Ivan Shevchuk, 2019. "Review of Bank of Russia Conference on 'Macroprudential Policy Effectiveness: Theory and Practice'," Russian Journal of Money and Finance, Bank of Russia, vol. 78(3), pages 89-121, September.
    17. Rebeca Jiménez‐Rodríguez & Amalia Morales‐Zumaquero, 2020. "Impact of commodity prices on exchange rates in commodity‐exporting countries," The World Economy, Wiley Blackwell, vol. 43(7), pages 1868-1906, July.
    18. Mert Onen & Hyun Song Shin & Goetz von Peter, 2023. "Overcoming original sin: insights from a new dataset," BIS Working Papers 1075, Bank for International Settlements.
    19. Liu, Zheng & Pappa, Evi, 2008. "Gains from international monetary policy coordination: Does it pay to be different?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(7), pages 2085-2117, July.
    20. Corsetti, Giancarlo & Dedola, Luca & Leduc, Sylvain, 2010. "Optimal Monetary Policy in Open Economies," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 16, pages 861-933, Elsevier.

    More about this item

    Keywords

    time series models; foreign exchange; open economy macroeconomics;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:1083. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.