THE ROLE OF COMMODITY TERMS OF TRADE IN THE DETERMINATION OF THE REAL EXCHANGE RATES OF THE MEDITERRANEAN COUNTRIES

Mariam Camarero, Juan Cuestas and Javier Ordóñez

The Developing Economies, 2008, vol. 46, issue 2, 188-205

Abstract: The aim of this paper is to investigate whether there exists a long‐run relationship between the real exchange rate and the commodity terms of trade in the so‐called Mediterranean or MENA countries. These economies are good candidates for this type of formulation, as are commodity exporting countries. Using cointegration techniques, we find long‐run relationships linking the real exchange rate and a commodity‐based measure of the terms of trade. Therefore, commodity terms of trade are a potential explanation for the apparent nonstationarity of MENA countries’ real exchange rates previously found in the empirical literature.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:bla:deveco:v:46:y:2008:i:2:p:188-205

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