Real exchanges rates in commodity producing countries: A reappraisal

V. Bodart, B. Candelon, J.F. Carpantier

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Commodity price booms, as those recorded in the last decade, may have a significant economic impact in small, commodity exporting, developing countries. Whether the impact on output is positive or negative is still unclear. It depends on various factors, notably on the impact that commodity prices can have on the real exchange rate of the commodity exporting countries. Two recent papers show that the real exchange rate appreciates when commodity prices increase. Our analysis produces new estimates of this relationship by focusing on a large sample of developing countries which are specialized in the export of one leading commodity. By using non-stationary panel techniques robust to cross-sectional dependence, we find that the price of the dominant commodity has a significant long-run impact on the real exchange rate when the exports of the leading commodity have a share of at least 20 percent in the country's total exports of merchandises. Our results also show that the larger this share, the larger the size of the impact.

Original languageEnglish
Pages (from-to)1482-1502
Number of pages21
JournalJournal of International Money and Finance
Volume31
Issue number6
DOIs
Publication statusPublished - Oct 2012

Keywords

  • Commodity producers
  • Commodity prices
  • Natural resource curse
  • Non-stationary panel
  • Real exchange rates
  • UNIT-ROOT TESTS
  • PANEL-DATA
  • HETEROGENEOUS PANELS
  • COINTEGRATION
  • CURRENCIES
  • PRICES

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