scholarly journals Oil volatility pass through and real exchange misalignment in leading commodity exporting countries

2020 ◽  
Vol 71 (6) ◽  
pp. 579-606
Author(s):  
Nicola Rubino
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Goodness Of Fit ◽  
Real Exchange Rates ◽  
Commodity Prices ◽  
Price Volatility ◽  
Oil Price ◽  
Price Variation ◽  
The Real ◽  
Speed Of Adjustment

Past research has shown how real Exchange rates follow a univariate nonlinear process that approximates their behavior in terms of transaction costs. However, little or nothing has been said about alternative sources of nonlinearity in commodity exporting countries. Our paper investigates the missing link between the Real Exchange Rate Commodity Prices equilibrium by employing an oil price volatility measure as an external source of short-term fluctuations. Our estimates show that the Real Exchange Rate Commodity price relationship appears to be nonlinear with respect to oil price variation, and that the goodness of fit of the nonlinear specifications appears to outperform that of the equivalent linear models. The equilibrium speed of adjustment appears to be different in the two branches of the relationship: in the majority of the threshold models, the negative volatility regime presents a faster speed of adjustment and in some cases a most significant one.

scholarly journals Boom Goes the Price: Giant Resource Discoveries and Real Exchange Rate Appreciation

2020 ◽  
Vol 130 (630) ◽  
pp. 1715-1728 ◽  
Author(s):  
Torfinn Harding ◽  
Radoslaw Stefanski ◽  
Gerhard Toews
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Direct Evidence ◽  
Oil And Gas ◽  
Real Exchange Rates ◽  
Labour Productivity ◽  
Dutch Disease ◽  
The Real ◽  
Traded Goods

Abstract We estimate the effect of giant oil and gas discoveries on bilateral real exchange rates. A giant discovery with the value of 10% of a country’s GDP appreciates the real exchange rate by 1.5% within ten years following the discovery. The appreciation starts before production begins and the non-traded component of the real exchange rate drives the appreciation. Labour reallocates from the traded goods sector to the non-traded goods sector, leading to changes in labour productivity. These findings provide direct evidence on the channels central to the theories of the Dutch disease and the Balassa–Samuelson effect.

Are the Real Exchange Rates of the New EU Member Countries in Line with Fundamentals? – Implications of the NATREX Approach

2012 ◽  
Vol 232 (2) ◽  
Author(s):  
Michael Frenkel ◽  
Isabell Koske
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
Oecd Countries ◽  
The Real ◽  
Estimation Strategy ◽  
Limited Availability ◽  
Two Step Estimation ◽  
The Eu

SummaryThis paper derives equilibrium real exchange rates for the EU member countries that joined in 2004 and in 2007. Our analysis is based on the natural real exchange rate approach and uses data for the period 1980-2007. We employ a two-step estimation strategy to deal with the limited availability and reliability of data from these countries. We first estimate the model for a panel of 17 OECD countries and then apply the estimated relationship to the new EU member countries. While the model does not support the appreciation of some of the examined currencies in 2005-2007, the development of several other currencies of the CEECs appears to be fairly in line with our NATREX estimates.

Common Trends and Common Cycles in Oil Price and Real Exchange Rate

2014 ◽  
Vol 14 (2) ◽  
pp. 249-263 ◽  
Author(s):  
Hem C. Basnet ◽  
Puneet Vatsa ◽  
Subhash Sharma
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Crude Oil ◽  
Real Exchange Rates ◽  
Oil Prices ◽  
Oil Price ◽  
Cycle Decomposition ◽  
The Real ◽  
Crude Oil Prices ◽  
Common Cycles

This study explores the long- and short-run movement between oil prices and the real exchange rates of two large oil-exporting countries – Canada and Norway. Cointegration and serial correlation common features tests are jointly used to identify the long-term common trend and short-term common cycles. Our test results find that oil prices and the real exchange rates of the Canadian Dollar and the Norwegian Krone have two shared trends and one shared cycle. The trend–cycle decomposition shows a great deal of positive comovement among the trend and cyclical components. The two currencies show economic dynamics very similar to crude oil prices. They do not exhibit any qualitative differences in the trajectory of the trend and cycles when controlling for different crude oil prices. Our results indicate that oil price fluctuations play significant role in explaining the exchange rate movements of oil-exporting countries.

scholarly journals Do emigrants’ remittances cause Dutch disease? A developing countries case study

2019 ◽  
Vol 30 (1) ◽  
pp. 59-76
Author(s):  
Burçak Polat ◽  
Antonio Rodríguez Andrés
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Real Exchange Rate ◽  
Real Exchange Rates ◽  
Development Aid ◽  
Dutch Disease ◽  
The Real ◽  
Trade Competitiveness ◽  
Remittance Flows

Although the positive socio-economic effects of remittances for recipient countries in the short term are unmistakable, inflows of remittances may at the same time exert adverse effects on the trade competitiveness of an economy, by appreciating the real exchange rate. This phenomenon is characterised as an instance of the ‘Dutch disease’ – the negative impact of windfall revenue inflows on the competitiveness of other tradable sectors and hence on overall economic growth. While the real effect of workers’ remittances on real exchange rates in a recipient economy is still a controversial issue, several studies have analysed evidence for the existence of the ‘Dutch disease’ phenomenon in various sets of countries. The main objective of this study is to examine whether remittance flows have had any adverse effect on the international trade competitiveness of a selected group of developing countries during the period from 1995 to 2014. Using a one-step system Generalised Method of Moments specification within a simultaneous equation approach, it shows that remittance flows depreciate the real exchange rate at their levels and that the lagged value of remittances create the Dutch disease for this country group. In addition, we confirm that while trade openness and world real interest rates contribute to a depreciation in real exchange rates, gross domestic product per capita and net Official Development Aid inflows tend to appreciate real exchange rates. A policy implication is that trade liberalisation policies that lower tariff rates on capital imports and new export-oriented incentive programmes should be accompanied by measures designed to prevent appreciation in the real exchange rate: steps in this direction such as recent macroeconomic and prudential capital flow management initiatives are briefly referenced. JEL Codes: F20, F21, F22, F23

The Determinants of Long-run Real Exchange Rate in South Africa: A Fundamental Equilibrium Approach

2015 ◽  
Vol 15 (3) ◽  
pp. 319-336 ◽  
Author(s):  
Bernard Njindan Iyke ◽  
Nicholas M. Odhiambo
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Trade Openness ◽  
Commodity Prices ◽  
Testing Procedure ◽  
Terms Of Trade ◽  
Bounds Testing ◽  
The Real ◽  
Long Run

In this paper, we identify the fundamental determinants of the long-run exchange rate in South Africa. We then estimate the equilibrium real exchange rate for this country using a dataset covering the period 1975–2012. In order to account for possible short-run fluctuations in the real exchange rate, we conducted a cointegration test using the ARDL bounds testing procedure. First, we found terms of trade, trade openness, government consumption, net foreign assets and real commodity prices to be the long-run determinants of the real exchange rate in South Africa. Second, we found that nearly 68.06% of the real exchange-rate disequilibrium is corrected annually. Overall, the estimated equilibrium rate indicates that the Rand has been depreciating in real terms over the years. Tightening trade openness is not an option, given international agreements; on the other hand, terms of trade and real commodity prices are determined by the world market. The obvious policy alternative is for South Africa to increase government spending and moderately decrease her net foreign asset position.

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