Real exchange rates and primary commodity prices

• 成果类型: Article
• 署名作者: Ayres, Joao; Hevia, Constantino; Pablo Nicolini, Juan
• 署名单位: Inter-American Development Bank; Universidad Torcuato Di Tella; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2019.103261
• 发表日期: 2020
• 关键词: Primary commodity prices; Real exchange rate disconnect puzzle

摘要

In this paper, we show that there is substantial comovement between prices of primary commodities such as oil, aluminum, maize, or copper and real exchange rates between developed economies such as Germany, Japan, and the United Kingdom against the US dollar. We therefore explicitly consider the production of commodities in a two-country model of trade with productivity shocks and shocks to the supply of commodities. We calibrate the model so as to reproduce, among other things, the volatility and persistence of primary commodity prices and show that it delivers equilibrium real exchange rates that are as volatile and persistent as they are in the data. The model rationalizes an empirical strategy to identify the fraction of the variance in real exchange rates that can be accounted for by the underlying shocks, even if those shocks are not observable. We use this strategy to argue that shocks that move primary commodity prices account for a large fraction of the volatility of real exchange rates in the data. Our analysis implies that existing models used to analyze real exchange rates between large economies that mostly focus on trade between differentiated final goods could benefit, in terms of matching the behavior of real exchange rates, by also considering trade in primary commodities. (C) 2019 Elsevier B.V. All rights reserved.