Commodity price volatility, external debt and exchange rate regimes

Monoj Kumar Majumder, Mala Raghavan () and Joaquin Vespignani

No 2020-13, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.

Keywords: Commodity price volatility; external debt; commodity-exporting countries; exchange rate regime (search for similar items in EconPapers)
JEL-codes: E62 F31 F34 G01 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2020
New Economics Papers: this item is included in nep-mac
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Published by the University of Tasmania. Discussion paper 2020-13

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Related works:
Working Paper: Commodity price volatility, external debt and exchange rate regimes (2020)
Working Paper: Commodity Price Volatility, External Debt and Exchange Rate Regimes (2020)
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