Real Exchanges Rates in Commodity Producing Countries: A Reappraisal

Posted: 14 Apr 2013

See all articles by Jean-Francois Carpantier

Jean-Francois Carpantier

Universite du Luxembourg

Vincent Bodart

Catholic University of Louvain (UCL) - Department of Economics

Bertrand Candelon

University of Maastricht - Department of Economics

Date Written: April 12, 2013

Abstract

Commodity price booms, as those recorded in the last decade, may have a significant economic impact in small, commodity exporting, developing countries. Whether the impact on output is positive or negative is still unclear. It depends on various factors, notably on the impact that commodity prices can have on the real exchange rate of the commodity exporting countries. Two recent papers show that the real exchange rate appreciates when commodity prices increase. Our analysis produces new estimates of this relationship by focusing on a large sample of developing countries which are specialized in the export of one leading 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 this share, the larger the size of the impact.

Keywords: Commodity producers, Commodity prices, Natural resource curse, Non-stationary panel, Real exchange rates

JEL Classification: C32, E31, F32, O11

Suggested Citation

Carpantier, Jean-Francois and Bodart, Vincent and Candelon, Bertrand, Real Exchanges Rates in Commodity Producing Countries: A Reappraisal (April 12, 2013). Journal of International Money and Finance, Vol. 31, No. 6, 2012, Available at SSRN: https://ssrn.com/abstract=2249717

Jean-Francois Carpantier (Contact Author)

Universite du Luxembourg ( email )

L-1511 Luxembourg
Luxembourg
00324666446305 (Phone)

HOME PAGE: http://https://sites.google.com/site/econojfc/

Vincent Bodart

Catholic University of Louvain (UCL) - Department of Economics ( email )

Department of Economics
B1348 Louvain-la-Neuve, 1348
Belgium
++3210/47.41.44 (Phone)
++3210/47.39.45 (Fax)

HOME PAGE: http://www2.econ.ucl.ac.be/~sexvb/

Bertrand Candelon

University of Maastricht - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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