A Multilateral Exchange Rate Model for Primary Producing Countries

Abstract

This paper presents a small simulation model that can be used to estimate the medium-run effects of exchange rate changes on the trade balance of a primary producing country. The model is applied to four copper producing countries, Chile, Peru, Zaire, and Zambia. The model can estimate the effect of several simlutaneous exchange rate changes. It uses a commodity by commodity approach, and allows for a high rate of inflation in the primary producer. The model is simulated numerically, based on estimated parameters.

Keywords: Exchange rates, primary producing country, copper

JEL Classification: F17, O24