Commodity currencies and currency commodities

Clements, Kenneth W.; Fry, Renée

doi:10.1016/j.resourpol.2007.10.004

Cited by 82 publications

(36 citation statements)

References 55 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…For this reason, commodity terms of trade are often assumed to be exogenous to the exchange rate. However, Clements and Fry (2007) challenge this conventional view, by evidencing some spillovers between commodity prices and the ‘commodity currencies’ in three large advanced commodity‐exporting countries: Australia, New Zealand and Canada.…”

Section: Data and Estimation Resultsmentioning

confidence: 90%

Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies

2011

View full text Add to dashboard Cite

The aim of this paper is to investigate the equilibrium exchange rates for commodity and oil currencies as well as the discrepancies of their observed exchange rates to these equilibriums. To this end, first, we estimate a long‐term relationship between the real effective exchange rate and economic fundamentals, including the commodity terms of trade. The estimation relies on panel cointegration techniques and covers annual data from 1980 to 2007. Our results show that real exchange rates co‐move with commodity prices in the long run and respond to oil price somewhat less than to commodity prices. Second, we assess the degree of misalignment of these currencies, as the gap between their observed exchange rate and the estimated equilibrium exchange rate. We show that these misalignments are not significantly related to the exchange rate regimes adopted by the countries, either pegged or floating. However, for pegged currencies, the size of misalignments significantly depends on the anchor currency, either the euro or the dollar. A comparison of misalignments of pegged commodity and oil currencies across different periods confirms these results: during periods of dollar (euro) overvaluation, currencies pegged to the dollar (euro) tend to be overvalued; the reverse being true when the dollar (euro) is undervalued. Consequently, pegged currencies are often driven away from their equilibria by wild fluctuations in the key currencies, on which they are anchored.

show abstract

Section: Data and Estimation Resultsmentioning

confidence: 90%

Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies

2011

View full text Add to dashboard Cite

show abstract

“…However, the correlation coefficients of Australian and Canadian dollars with world commodity prices are both negative (a negative change is a real appreciation of the home currency) and relatively larger. This result may have implications for the interactions between exchange rates and world commodity prices (see, Chen and Rogoff, ; Clements and Fry, , among others).…”

Section: Correlationsmentioning

confidence: 94%

Exchange Rate Volatility Before and After the Float

Wali

Manzur

2013

World Economy

View full text Add to dashboard Cite

INTRODUCTIONE XCHANGE rates have been notoriously volatile since switch to floating rates by major currencies in the early 1970s (Manzur, 2003;Manzur and Chan, 2010). Higher exchange rate volatility means increased uncertainty for international business, which can be enormously costly. To cope with this, economic managers have been constantly looking for alternative arrangements. The best example of a potential solution is the European Union whose member countries revoked use of their national currencies and adopted a single currency (the euro). A number of emerging economies have struggled with variants of managed exchanged rate regimes. Smaller countries like Panama and Ecuador have gone for dollarisation, and other high-inflation countries like Mexico and Argentina are viewed as likely candidates for this option. Consequently, the issue of exchange rate volatility is of great concern for policymakers and business.How volatile have real exchange rates been since a return to floating by the major currencies? In this paper, we provide a descriptive analysis of the broad features of major exchange rates since the early 1970s, and compare these with those of the 1960s. Also included is an analysis of whether these features are manifested in real interest rates and commodity prices. Our purpose here is to describe the features rather than to explain them. A descriptive historical study is useful in abstracting a global picture corroborating the stylised facts that are fundamental to understanding the behaviour of exchange rates. Our results have implications for several unresolved issues in exchange rate modelling, such as asymmetric exchange rate dependence (see, for example, Patton, 2006), financial risk management (see, for example, Christoffersen and Diebold, 2006), international trade and capital flows (see, for example, Kiyota and Urata, 2004) and the political economy of exchange rate regimes (see, among others, Willett, 2007;Wilson and Ng, 2007). BASIC STATISTICSWe focus on the log-changes (or return) of real rather than nominal exchange rates involving four major currencies: the Australian dollar, Canadian dollar, Japanese yen and British pound sterling. 1 The euro is not included because of its relatively shorter period of existence and the complexity of common inflation in the Eurozone. Real exchange rates are calculated as nominal rates (expressed as domestic currency costs of $US1) multiplied by the ratio of the domestic price level to the US price level. The consumer price index (CPI) is used for

show abstract

“…Clements and Fry [13] identified countries that are considered to have "commodity currencies" because they are rich in natural resources. In a hint that these resources could provide a standard of value, they found that spillovers from commodities to currencies contributed less than 1% to the volatility of currencies, while spillovers from currencies to commodities contributed between 2% and 5.2% to commodity price volatility.…”

Section: Exchange Rate Regimes and Currency Valuationmentioning

confidence: 99%

Agricultural Commodity Markets: Reference Point for the Real Value of a Currency

McFarlane¹

2014

View full text Add to dashboard Cite

Using monthly time-series data 1999-2013, the paper shows that markets for agricultural commodities provide a yardstick for real purchasing power, and thus a reference point for the real value of fiat currencies. The daily need for each adult to consume about 2800 food calories is universal; data from FAO food balance sheets confirm that the world basket of food consumed daily is non-volatile in comparison to the volatility of currency exchange rates, and so the replacement cost of food consumed provides a consistent indicator of economic value. Food commodities are storable for short periods, but ultimately perishable, and this exerts continual pressure for markets to clear in the short term; moreover, food calories can be obtained from a very large range of foodstuffs, and so most households are able to use arbitrage to select a near optimal weighting of quantities purchased. The paper proposes an original method to enable a standard of value to be established, definable in physical units on the basis of actual worldwide consumption of food goods, with an illustration of the method.

show abstract

Commodity currencies and currency commodities

Cited by 82 publications

References 55 publications

Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies

Does Euro or Dollar Pegging Impact the Real Exchange Rate? The Case of Oil and Commodity Currencies

Exchange Rate Volatility Before and After the Float

Agricultural Commodity Markets: Reference Point for the Real Value of a Currency

Contact Info

Product

Resources

About