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Title: A panel study of the effect of commodity price levels and volatility on the real exchange rates Authors:  Nicola Rubino - University of Barcelona (Spain) [presenting]
Abstract: The aim is to study the impact of leading commodity prices long run term trends and their volatility on the real exchange rate short term convergence in an error correction background in a panel of developed and developing countries. Through the Mean Group DOLS estimator and the Logistic Smooth Transition Regression, we show that introducing a commodity price index in a cointegrating relationship with the real effective exchange rate instead of a standard terms of trade variable radically changes the long run impact of price variation, implying commodity dependency other than losses or gains in external competitiveness. The estimates show that emerging countries, and among those energy exporting ones, are those that would be more aggressively conditioned by disequilibria. As different measures of volatility are taken into account to capture arbitrage opportunities and the alternating regimes of convergence of the exchange rate to its equilibrium, it is proven that the Commodity Points theory of Hecksher can be effectively generalized at the longitudinal level without the need of resorting to external sources of variation which do not appear to have found their place in economic theory yet.