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Real Exchanges Rates in Commodity Producing Countries: A Reappraisal

Vincent Bodart, Bertrand Candelon () and Jean-François Carpantier ()

No 2011007, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Commodity currency literature recently stressed the importance of commodity prices as a determinant of real exchange rates in developing countries (Cashin, Cespedes and Sahay 2004). We provide new empirical evidence on this issue by focusing on countries which are specialized in the export of one leading commodity. For those countries, we investigate to which extent their real exchange rate is sensitive to price uctuations of their dominant 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 the share, the larger the size of the impact.

Keywords: Real exchange rates; commodity prices; non-stationary panel (search for similar items in EconPapers)
JEL-codes: C32 C33 E31 F32 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-opm
Date: 2011-02-04
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Related works:
Journal Article: Real exchanges rates in commodity producing countries: A reappraisal (2012) Downloads
Working Paper: Real exchanges rates in commodity producing countries: A reappraisal (2012)
Working Paper: Real exchanges rates in commodity producing countries: A reappraisal (2011) Downloads
Working Paper: Real exchanges rates in commodity producing countries: A reappraisal (2011)
Working Paper: Real Exchanges Rates in Commodity Producing Countries: A Reappraisal (2011)
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