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

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  • Sebastian Edwards

Abstract

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.

Suggested Citation

  • Sebastian Edwards, 1985. "Commodity Export Boom and the Real Exchange Rate: The Money-Inflation Link," NBER Working Papers 1741, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1741
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    References listed on IDEAS

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    1. Sebastian Edwards, 1983. "The Short-Run Relation Between Inflation and Growth in Latin America," NBER Working Papers 1065, National Bureau of Economic Research, Inc.
    2. José Antonio Ocampo, 1983. "En defensa de la continuidad del régimen cambiario," Coyuntura Económica, Fedesarrollo, vol. 13(1), pages 198-214, March.
    3. Edwards, Sebastian & Aoki, Masanao, 1983. "Oil export boom and Dutch-disease : A dynamic analysis," Resources and Energy, Elsevier, vol. 5(3), pages 219-242, September.
    4. J. Peter Neary, 1985. "Real and Monetary Aspects of the ‘Dutch Disease’," International Economic Association Series, in: Karl Jungenfelt & Douglas Hague (ed.), Structural Adjustment in Developed Open Economies, chapter 12, pages 357-391, Palgrave Macmillan.
    5. 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 477-482, June.
    6. Miguel Urrutia, 1981. "Experience with the Crawling Peg in Colombia," Palgrave Macmillan Books, in: John Williamson (ed.), Exchange Rate Rules, pages 207-229, Palgrave Macmillan.
    7. Harberger, Arnold C., 1983. "Dutch disease -- how much sickness, how much boon?," Resources and Energy, Elsevier, vol. 5(1), pages 1-20, March.
    8. 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.
    9. 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 390-395, June.
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    Cited by:

    1. Khatai Aliyev & Altay Ismayilov & Ilkin Gasimov, 2019. "Modelling Elasticity of Non-Oil Tax Revenues to Oil Price Changes: is There U-Shaped Association? Evidence from Azerbaijan," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(3), pages 799-810.
    2. Manfred Wiebelt & Rainer Schweickert & Clemens Breisinger & Marcus Böhme, 2011. "Oil revenues for public investment in Africa: targeting urban or rural areas?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 745-770, November.
    3. Valle Quintana Facundo Marcelo, 2023. "Argentina post COVID: commodity boom o commodity doom?," Asociación Argentina de Economía Política: Working Papers 4696, Asociación Argentina de Economía Política.
    4. Hasanov, Fakhri, 2009. "Analyzing price level in a booming economy: the case of Azerbaijan," MPRA Paper 29555, University Library of Munich, Germany.
    5. Meijer, A.E.M. & Vingerhoets, J.W.A., 1989. "Structural adjustment and diversification in mineral exporting developing countries," Research Memorandum FEW 395, Tilburg University, School of Economics and Management.
    6. Hathroubi, Salem & Aloui, Chaker, 2022. "Oil price dynamics and fiscal policy cyclicality in Saudi Arabia: New evidence from partial and multiple wavelet coherences," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 149-160.
    7. Fakhri Hasanov, 2010. "The Impact of Real Oil Price on Real Effective Exchange Rate: The Case of Azerbaijan," Discussion Papers of DIW Berlin 1041, DIW Berlin, German Institute for Economic Research.
    8. Meijer, A.E.M. & Vingerhoets, J.W.A., 1989. "Structural adjustment and diversification in mineral exporting developing countries," Other publications TiSEM 5b859d20-651b-4681-89df-f, Tilburg University, School of Economics and Management.
    9. Suresh Ramakrishnan & Shamaila Butt & Melati Ahmad Anuar, 2017. "The Impact of Macroeconomic, Oil Prices and Socio-economic Factors on Exchange Rate in Pakistan: An Auto Regressive Distributed Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 489-499.

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