Commodity prices and exchange rate volatility: Lessons from South Africa's capital account liberalization

Arezki, Rabah; Dumitrescu, Elena Ivona; Freytag, Andreas; Quintyn, Marc

doi:10.1016/j.ememar.2014.01.001

Cited by 37 publications

(30 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Simpson (2002) [3] using ordinary least squares method studied the relationship between commodity prices and Australian dollar and reported greater explanatory power of commodity prices in explaining exchange rate fluctuations. Arezki et al (2012) [4] through cointegration tests and vector error correction models established causality running from South African Rand to gold price volatility before the capital account was liberalized; the direction of causality reverses after capital account liberalization. Edwards (1985) [5] studying the relationship between exchange rate and world coffee prices reported that coffee price changes had been negatively related to devaluation of Colombian currency.…”

Section: Introductionmentioning

confidence: 99%

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

Bashar¹,

Kabir²

2013

IJTEF

View full text Add to dashboard Cite

Abstract-This study seeks to identify major factors behind recent fluctuations in Australian dollar. Using quarterly data for over 30 years and cointegration and error correction models, we found that in the long run exchange rate is determined by commodity prices, interest rate and other factors such as Global Financial Crisis. We found two-way Granger causality between exchange rate and commodity prices, but one-way Granger causality from Global Financial Crisis to commodity prices. The implications of our findings is that by providing substantial incentives to Australian producers, the policy makers in Australia can ensure competitive commodity prices and exchange rate. Portfolio managers could also benefit from our findings knowing the mechanism of Global Financial Crisis impacting Australian dollar.

show abstract

Section: Introductionmentioning

confidence: 99%

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

Bashar¹,

Kabir²

2013

IJTEF

View full text Add to dashboard Cite

show abstract

“…The focus on inflation and institutional features of the monetary policy regime in this paper stands in contrast with the alternative explanation – that of so‐called commodity currencies – for currency volatility in the South African context (e.g. Arezki et al ., ).…”

Section: Literaturementioning

confidence: 97%

The Exchange Rate Dimension of Inflation Targeting: Target Levels and Currency Volatility

Plessis

Reid

2015

South African J Economics

View full text Add to dashboard Cite

The surprising volatility of floating exchange rates have puzzled macroeconomists and challenged policy makers since the seventies. This is no less true in South Arica where the Rand's volatility is a longstanding policy and business challenge. This paper extends the literature on nominal and institutional factors associated with currency volatility. Rose's description of inflation as "Bretton Woods in reverse" is the departure point and is read with Berganza and Broto's recent demonstration in a time series study that inflation targeting emerging market economies have experience higher exchange rate volatility. Meanwhile Bleaney and Tian have shown the crosssectional connection between the level of inflation and exchange rate volatility. We build on Bleaney and Tian's cross-sectional approach to investigate the association between the level at which inflation targeting countries target inflation and exchange rate volatility over the long run. Crucially, we control for the average level of inflation and distinguish between inflation targeting countries that target high and low levels of inflation, in order to investigate whether the choice of the level of the inflation target (an institutional feature) is associated with greater exchange rate volatility. JEL Classification: F31, E58

show abstract

“…This direction of causality in the prices is well evident from the result of granger causality test summarized in table 4. The study hence concludes that exchange value of US Dollar is an important factor in fluctuations in gold prices in India like in case of South Africa as concluded by (Arezki, Dumitrescu, Freytag, & Quintyn, 2012). Even though this relationship has changed with the occurrence of global recession, the exchange value of USD should be taken into consideration while taking any investment decision in the metal (Tully & Lucey, 2007) …”

Section: Discussionmentioning

confidence: 99%

“…However, the study has not segregated the duration of the global financial crisis and included the data since January 1991 to October 2012 at a streach. On similar lines, (Arezki, Dumitrescu, Freytag, & Quintyn, 2012) used the Johansen Cointegration and granger causality test to find the flow of causality of movement in gold prices and foreign exchange rate in case of prior and post capital account liberalization in South Africa. The findings of the study indicated that the direction of causality was from exchange value of Rand to gold prices in pre libralization phase.…”

Section: Literature Reviewmentioning

confidence: 99%

The Relationship between Gold Prices and Exchange Value of US Dollar in India

Nair

Choudhary

Purohit

2015

emaj

View full text Add to dashboard Cite

The inverse relationship between the value of U.S. dollar and that of gold is one of the most talked about relationships in currency markets. The present study is an attempt to understand the impact of recession of 2008 on relationship between exchange rat e of US dollar in INR and gold prices in India. The study uses Johansen Co-Integration test to check the long term association between exchange rate of US dollar in INR and gold prices in India and it further uses the Granger Causality Test to check the lead lag relationship between the variables. A separate pre, during and post recession analysis of the variables is done to understand the impact of recession on this relationship. The study highlights how this relationship has changed since the global turmoil.

show abstract

Commodity prices and exchange rate volatility: Lessons from South Africa's capital account liberalization

Cited by 37 publications

References 12 publications

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

The Exchange Rate Dimension of Inflation Targeting: Target Levels and Currency Volatility

The Relationship between Gold Prices and Exchange Value of US Dollar in India

Contact Info

Product

Resources

About