## Real Exchange Rates and Commodity Prices

_IMF Working Papers, April 1, 1996_

## Source details

**Canonical URL:** [Real Exchange Rates and Commodity Prices](https://www.imf.org/en/publications/wp/issues/2016/12/30/real-exchange-rates-and-commodity-prices-1844)

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## Bibliographic details
- Authors: Dominique Yves Dupont, V. Hugo Juan-Ramon
- Published: April 1, 1996
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451844474.001

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### Research question and motivation
- Examines relations between fluctuations in real exchange rates among the major currencies and fluctuations in real commodity prices.
- Motivation: Increased exchange rate volatility calls for a better understanding of these relations.
- Notes gap: "To the best of our knowledge, no systematic study of those effects has been performed on a wide range of commodities," with existing work (Sjaastad and Scacciavillani (1993)) focused on gold.

### Model and methodology
- Builds on Sjaastad and Scacciavillani’s approach and constructs a supply and demand multi-country model with world market clearing.
- Model features:
  - Incorporates speculative and non-speculative demands for inventories.
  - Incorporates “static” and “rational” expectations.
- Estimation approach:
  - Uses several econometric methods.
  - Monthly data from January 1972 to January 1992.
  - Sample covers 65 commodity prices.

### Key empirical findings
- For a small group of commodities, the dollar-denominated price is significantly influenced by the deutsche mark and the yen.
- Geographical proximity matters in determining commodity prices in world markets.
- Supply and demand elasticities are important determinants of commodity prices in world markets, above and beyond the size of the share of those commodities in world trade.

### Scope and subject tags
- Subjects: Agricultural commodities, Commodities, Commodity prices, Foreign exchange, Oil, Prices, Real exchange rates.
- Keywords: Agricultural commodities, commodity price, commodity price in terms, Commodity prices, commodity prices determination, commodity world demand, deutsche mark, dollar price, dollar price of the commodity, Europe, excess demand, long-terms elasticity, LTNCTAD commodity yearbook, market power, Oil, price expectation, price of the commodity, Real exchange rates, soybean meal, world demand, world price of a commodity, WP.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/real-exchange-rates-and-commodity-prices-1844_