When the Walk is Not Random: Commodity Prices and Exchange Rates

Abstract

BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

Forecasting exchange rates with commodity prices—a global country analysis

“…When estimating Equation () for commodity‐exporting countries and the sample period 2004–16, the results are very similar to those of Kohlscheen et al. (); that is, we estimate a significantly positive coefficient of . However, the coefficient is slightly higher and R 2 is twice as high.…”

“…Kohlscheen et al. () have a slightly higher number of categories due to more types in the category metal.…”

“…Kohlscheen et al. () use a panel data model with fixed effects for their analysis. To be able to compare our with these results, we follow a somehow similar approach.…”

“…For example, they contain simple precursors such as glass, paper or chemicals. Kohlscheen et al (2017) have a slightly higher number of categories due to more types in the category metal.…”

“…The paper extends the existing literature by various aspects. Based on the methodology of Chen and Rogoff () and Kohlscheen, Avalos, and Schrimpf (), this work provides a comprehensive picture of the predictive properties of commodity prices for a large number of 126 countries over a period from 1993 to 2016. To the best of our knowledge, this is the first paper that uses such a broad country sample.…”