TY - CEPII
A1 - Virginie Coudert
A1 - Cécile Couharde
A1 - Valérie Mignon
TI - Do Terms of Trade Drive Real Exchange Rates? Comparing Oil and Commodity Currencies
IS - 2008-32
T3 - Working Papers
KW - Commodities
KW - Oil
KW - Terms of trade
KW - Equilibrium real exchange rates
KW - Anchor currencies
N2 - 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.
ER -