Commodity Currencies and Empirical Exchange Rate Puzzles

This paper re-examines empirical exchange rate puzzles by focusing on three OECD economies (Australia, Canada, and New Zealand) where primary commodities constitute a significant share of their exports. For Australia and New Zealand especially, we find that the U.S. dollar price of their commodity e...

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Bibliographic Details
Main Author: Rogoff, Kenneth
Other Authors: Chen, Yu-chin
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2002
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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651 4 |a New Zealand 
653 |a Commodity Markets 
653 |a Government and the Monetary System 
653 |a Money 
653 |a Payment Systems 
653 |a Regimes 
653 |a Empirical Studies of Trade 
653 |a International economics 
653 |a Foreign exchange 
653 |a Standards 
653 |a Currencies 
653 |a Exchange rates 
653 |a Money and Monetary Policy 
653 |a Monetary economics 
653 |a Currency 
653 |a Macroeconomics 
653 |a International trade 
653 |a Monetary Systems 
653 |a Terms of trade 
653 |a Foreign Exchange 
653 |a Real exchange rates 
653 |a Exports and Imports 
653 |a Commodity prices 
653 |a Prices 
653 |a Economic policy 
653 |a Nternational cooperation 
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520 |a This paper re-examines empirical exchange rate puzzles by focusing on three OECD economies (Australia, Canada, and New Zealand) where primary commodities constitute a significant share of their exports. For Australia and New Zealand especially, we find that the U.S. dollar price of their commodity exports (generally exogenous to these small economies) -has a strong and stable influence on their floating real rates, with the quantitative magnitude of the effects consistent with predictions of standard theoretical models. However, after controlling for commodity price shocks, there is still a PPP puzzle in the residual. Nevertheless, the results here are relevant to many developing country commodity exporters, as they liberalize their capital markets and move towards floating exchange rates