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N° 2008-32 |
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| December 2008 |
Do Terms of Trade Drive Real Exchange Rates?
Comparing Oil and Commodity Currencies |
Virginie Coudert
Cécile Couharde
Valérie Mignon |
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| This paper investigates whether terms of trade have an impact on real exchange rates for
commodity exporters and oil exporters. To this end, we estimate a long term relationship
between the real effective exchange rate and economic fundamentals, including the
commodity terms of trade. The estimation relies on panel cointegration techniques and
covers annual data from 1980 to 2007. Our results show that real exchange rates co-move
with commodity prices in the long run and respond to oil price somewhat less than to
commodity prices. We also find that some pegged currencies have been driven away from
their equilibria by wild fluctuations in the key currencies, on which they are anchored. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Commodities; oil; terms of trade; equilibrium real exchange rates; anchor
currencies; panel cointegration |
Keywords |
| C23; F31; O13 |
JEL classification |
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