## Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters

_IMF Working Papers, April 23, 2021_

## Source details

**Canonical URL:** [Commodity Shocks and Exchange Rate Regimes: Implications for the Caribbean Commodity Exporters](https://www.imf.org/en/publications/wp/issues/2021/04/23/commodity-shocks-and-exchange-rate-regimes-implications-for-the-caribbean-commodity-exporters-50346)

## Other formats

- [Markdown version](/en/publications/wp/issues/2021/04/23/commodity-shocks-and-exchange-rate-regimes-implications-for-the-caribbean-commodity-exporters-50346/index.md)
- [Structured JSON version](/en/publications/wp/issues/2021/04/23/commodity-shocks-and-exchange-rate-regimes-implications-for-the-caribbean-commodity-exporters-50346/index.json)
- [Bundle manifest](/en/publications/wp/issues/2021/04/23/commodity-shocks-and-exchange-rate-regimes-implications-for-the-caribbean-commodity-exporters-50346/bundle-manifest.json)

## 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.*

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2021/english/wpiea2021104-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2021/english/wpiea2021104-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2021/04/23/commodity-shocks-and-exchange-rate-regimes-implications-for-the-caribbean-commodity-exporters-50346_