IMF Working Papers

Commodity Currencies and Empirical Exchange Rate Puzzles

By Kenneth Rogoff, Yu-chin Chen

February 1, 2002

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Kenneth Rogoff, and Yu-chin Chen. Commodity Currencies and Empirical Exchange Rate Puzzles, (USA: International Monetary Fund, 2002) accessed December 11, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper re-examines empirical exchange rate puzzles by focusing on three OECD economies (Australia, Canada, and New Zealand) where primary commodities constitute a significant share of their exports. For Australia and New Zealand especially, we find that the U.S. dollar price of their commodity exports (generally exogenous to these small economies) —has a strong and stable influence on their floating real rates, with the quantitative magnitude of the effects consistent with predictions of standard theoretical models. However, after controlling for commodity price shocks, there is still a PPP puzzle in the residual. Nevertheless, the results here are relevant to many developing country commodity exporters, as they liberalize their capital markets and move towards floating exchange rates.

Subject: Commodity prices, Currencies, Exchange rates, Foreign exchange, International trade, Money, Prices, Real exchange rates, Terms of trade

Keywords: Australia and New Zealand, Canadian dollar, Capital flows, Commodity, Commodity currency, Commodity economy, Commodity export, Commodity price, Commodity price movement, Commodity price stocks, Commodity prices, Currencies, Elasticity estimate, Exchange rate, Exchange rates, Global, Price data, Productivity-augmented equation, Real commodity price, Real exchange rates, Responses to world commodity price shock, Terms of trade, World commodity price series, WP

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2002/027

  • Stock No:

    WPIEA0272002

  • ISBN:

    9781451844535

  • ISSN:

    1018-5941