Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters
IMF Working Papers, April 23, 2021
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- Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters
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Bibliographic details
- Authors: Ali J Al-Sadiq, Inci Ötker
- Published: April 23, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513582597.001
Overview and Context
- Publication title: Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters
- Authors: Ali J Al-Sadiq, Inci Ötker
- Date: April 23, 2021
- Series: Working Paper No. 2021/104
- Issue: 104
- Volume: 2021
- Pages: 53
- DOI: https://doi.org/10.5089/9781513582597.001
- Stock No: WPIEA2021104
- ISBN: 9781513582597
- ISSN: 1018-5941
Key findings and empirical focus
- Declining commodity prices during mid-2014-2016 posed significant challenges to commodity-exporting economies.
- The severe terms of trade shock associated with a sharp fall in world commodity prices raised questions about the viability of pegged exchange rate regimes.
- The COVID-19 pandemic and containment measures have been associated with:
- significant disruption in travel, tourism, and hospitality industry;
- added downward pressure on commodity prices;
- a sharp fall in foreign exchange earnings;
- depressed economic activity in most commodity exporters.
- The paper reviews country experiences with different exchange rate regimes in coping with commodity price shocks.
- Analytical methods used:
- event study techniques;
- panel vector autoregression techniques.
- The paper analyzes, conceptually and empirically, policy and technical considerations in making exchange rate regime choices.
- It discusses the supporting policies that should accompany a given regime choice to make that choice sustainable.
- The paper offers lessons that could be helpful to the Caribbean commodity-exporters.
Subjects and keywords
- Subject: Commodities; Exchange rate adjustments; Exchange rate arrangements; Exchange rate flexibility; Exchange rates; Foreign exchange
- Keywords: Africa; Caribbean; Caribbean commodity-exporter; commodity exporter; commodity shock; Exchange rate adjustments; Exchange rate arrangements; Exchange rate flexibility; Exchange rates; Global; I. commodity terms-of-trade Index; regime choice
Research purpose and policy relevance
- Purpose:
- Review country experiences with different exchange rate regimes facing commodity price shocks.
- Explore the role of flexible exchange rates as a shock absorber.
- Analyze macroeconomic impact of adverse term-of-trade shocks under different regimes.
- Policy relevance:
- Evaluates policy and technical considerations for exchange rate regime choices.
- Identifies supporting policies required to sustain a chosen regime.
- Provides lessons targeted to Caribbean commodity-exporters facing commodity price volatility and pandemic-related shocks.
Source: IMF Working Papers — "Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters", Ali J Al-Sadiq and Inci Ötker, April 23, 2021, Working Paper No. 2021/104.
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- Working Paper