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Trend of Commodity Prices and Exchange Rate in Australian Economy: Time Varying Parameter Model Approach

Debasish Roy () and Ramaprasad Bhar ()
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Debasish Roy: Amity University
Ramaprasad Bhar: The University of New South Wales

Asia-Pacific Financial Markets, 2020, vol. 27, issue 3, No 6, 427-437

Abstract: Abstract Here we investigate the relationship between export commodity prices and AUD/USD exchange rate fluctuation using time varying parameter model. Using monthly data for over 30 years we found that exchange rate is determined by commodity prices and Australian base metal indices is highly correlated with country’s exchange rate. We have considered linear Gaussian state space model where common variance is treated as a stochastic time varying variable which gets considered for modeling economic time series.

Keywords: Commodity indices; Exchange rate; Regression model; Time varying parameter (search for similar items in EconPapers)
JEL-codes: F31 Q02 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10690-020-09301-9

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Handle: RePEc:kap:apfinm:v:27:y:2020:i:3:d:10.1007_s10690-020-09301-9