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Real exchanges rates in commodity producing countries : A reappraisal

Author

Listed:
  • Vincent Bodart

    (Solvay - Solvay)

  • Bertrand Candelon

    (Economics - Maastricht University [Maastricht])

  • Jean - François Carpantier

Abstract

Commodity currency literature recently stressed the importance of commodity prices as a determinant of real exchange rates in developing countries (Cashin, Cespedes and Sahay 2004). We provide new empirical evidence on this issue by focusing on countries which are specialized in the ex-port of one leading commodity. For those countries, we investigate to which extent their real exchange rate is sensitive to price fluctuations of their dominant commodity. By using non-stationary panel techniques robust to cross-sectional-dependence, we find that the price of the dominant commodity has a significant long-run impact on the real exchange rate when the exports of the leading commodity have a share of at least 20 percent in the country's total exports of merchandises. Our results also show that the larger the share, the larger the size of the impact.

Suggested Citation

  • Vincent Bodart & Bertrand Candelon & Jean - François Carpantier, 2011. "Real exchanges rates in commodity producing countries : A reappraisal," Working Papers hal-01821152, HAL.
    • Handle: RePEc:hal:wpaper:hal-01821152
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    as
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    More about this item

    Keywords

    real exchange rates; commodity prices; non-stationary panel;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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