A Study of the Relationship Between the Real Exchange Rate And Commodity Prices:The Case of Australian
Date Issued
2006
Date
2006
Author(s)
Denning, Benjamin Lance
DOI
zh-TW
Abstract
This paper looks at the relationship between the real exchange rate and commodity prices. After the adoption of a floating exchange rate, the Australian exchange rate has encountered a lot of highs and lows. As seen in various other studies, traditional exchange rate determination theory finds it hard to explain exchange rate fluctuation. This paper uses three different commodity price indexes to investigate their effect on the exchange rate. Coal is not considered in this study, rather, Australia’s other largest commodity exports, namely non-energy commodities: gold, aluminium and iron are. This paper uses an error correction model to further investigate the Australian exchange rate and its relationship to commodity prices. We find there is significant evidence to suggest that the non-energy commodity price index is an accurate predictor of the Australian exchange rate’s future direction. In addition to the above, we find that other commodity price indexes do not have a significant relationship with the exchange rate. This paper’s main conclusions are: (1) no time trend is seen when first differences are taken of the exchange rate and commodity price time series data; (2) there is a long term relationship between the Australian exchange rate and commodity prices; (3) after investigation by error correction model analysis, we find the Australian exchange rate responds to non-energy commodity prices after approximately three months.
Subjects
匯率
原物料價格
real exchange rate
commodity prices
Type
thesis
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