After the tide: Commodity currencies and global trade
Nikolai Roussanov and
Journal of Monetary Economics, 2017, vol. 85, issue C, 69-86
The decade prior to the Great Recession saw a boom in global trade and rising transportation costs. High-yielding commodity exporters׳ currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a two-country general equilibrium model that features specialization in production and endogenous fluctuations in trade costs. Slow adjustment in the shipping sector generates boom–bust cycles in freight rates and, as a consequence, in currency risk premia. We validate these predictions using global shipping data. Our calibrated model explains about 57% of the narrowing of interest rate differentials post-crisis.
Keywords: Shipping; Trade costs; Carry trade; Currency risk premia; Exchange rates; International risk sharing; Commodity trade (search for similar items in EconPapers)
JEL-codes: G15 G12 F31 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:85:y:2017:i:c:p:69-86
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