Commodity prices and exchange rates: evidence from commodity-dependent developed and emerging economies

PurposeIn this paper the authors examine evidence on exchange rate predictability through commodity prices for a set of countries categorized as commodity import- and export-dependent developed and emerging countries.Design/methodology/approachThe authors perform in-sample and out-of-sample forecasting analysis. The commodity prices are modeled to predict the exchange rate and to analyze whether this commodity price model can perform better than the random walk model (RWM) or not. These two models are compared and evaluated in terms of exchange rate forecasting abilities based on mean squared forecast error and Theil inequality coefficient.FindingsThe authors find that primary commodity prices better predict exchange rates in almost two-thirds of export-dependent developed countries. In contrast, the RWM shows superior performance in the majority of export-dependent emerging, import-dependent emerging and developed countries.Originality/valuePrevious studies examined the exchange rate of commodity export-dependent developed countries mainly. This study examines both developed and emerging countries and finds for which one the changes in prices of export commodities (in case of commodity export-dependent country) or prices of major importing commodities (in case of import-dependent countries) can significantly predict the exchange rate.

Development and Performance of the Pepper Industry in Malaysia: A Critical Review

The National Commodity Policy 2011-2020 was developed to increase the national income by harnessing the potential of commodity export revenues. Despite continuous efforts implemented by various related agencies, the overall performance of major commodities, particularly pepper, remains unsatisfactory. Regarded as a sought-after ‘king of spices’, pepper has become one of the most prized and important commodities traded globally. This paper highlights the development and performance of the pepper industry in Malaysia and discusses practical strategies and recommendations to transform the pepper industry. Besides conducting interviews with the industry experts to gain first-hand information, content and thematic analysis was employed based on secondary data research in this study. The findings of the study show that even though pepper is mostly used in food-related industries, its potential in pharmaceutical and cosmeceutical sectors remains underexplored. Globally, the overall supply and demand of pepper continue to increase, though the demand has recently exceeded supply. However, continuous new planting and farmexpansion initiatives by major producers caused the total global pepper supply to exceed consumption in 2018. In fact, pepper prices have declined more than 70% since 2015, which affected the overall household income of the rural community engaged in pepper farming. While experiencing low prices, smallholder pepper farmers and the industry continue to struggle with low domestic consumption, low production, higher cost of farm inputs, lack of extension services, low impact of research, development and innovation, ageing farming population, intense competition from other producing countries, low prices for quality pepper, limited subsidy to support continuous farming, pepper-related diseases, lack of new technology, and poor investment in downstream activities. Given this, the performance of the Malaysian pepper industry has fallen below expectations.

Oil and the Ruble: Collapse of Cointegration

Oil still contributes around 30 % to Russia's commodity export earnings, therefore the impact of oil prices on Ruble's exchange rate is of current interest to Russian economists. Instruments of time series analysis were used to test a proposition that the Russian ruble’s exchange rate has become less dependent on Brent crude oil price in recent years. We obtained 1,095 weekly observations for years 2000 to 2020 were obtained from FINAM company website. Our empirical model is a linear regression of the ruble’s exchange rate on Brent crude oil price. The Bai-Perron test has identified three structural breaks in the data corresponding to four chronological regimes. The Engle-Granger cointegration test has found both the rate and the price to be non-stationary in all regimes while cointegration was found only in the third regime (September 12, 2011 – October 23, 2017). The main reasons for collapse of cointegration in the fourth regime (October 30, 2017 – December 28, 2020) are 1) successful efforts by oil-producing countries to curb oil production, 2) decline in Russian import of goods and services, 3) Bank of Russia’s contractionary monetary policy, 4) built-in exchange rate stabilizer activated by the budget rule, and 5) anti-Russian sanctions. Cointegration, as it turns out, comes and goes.

Trends in the Development of Ukraine’s Foreign Trade in Goods in the Context of the COVID-19 Pandemic

The article discusses and analyzes the volumes of Ukraine’s foreign trade in goods in 2019-2020. A positive trend regarding the foreign trade balance on trade in Ukrainian goods is allocated. It is found that there was a decrease in exports and imports of goods during the researched period. The commodity structure of Ukraine’s foreign trade is analyzed. Changes in the commodity export structure in 2020 compared to 2019 have been identified. The main groups of goods that Ukraine exports and imports the most when trading with foreign countries are allocated. The groups of goods whose export and import volumes have undergone the greatest changes in 2020 and as compared to 2019 are allocated. The geographical structure of foreign trade in Ukrainian goods is analyzed. Changes in the geographical structure of exports in 2020 compared to 2019 are determined. It is specified, which countries are the largest importers of Ukrainian goods and from which countries Ukraine imports the most goods. The countries in terms of the largest changes as to the foreign trade with them in 2020 compared to 2019 are allocated. It is determined that the most important reason for changes in the volume of foreign trade in Ukrainian goods in 2020 compared to 2019 was the COVID-19 pandemic. The global impact of the coronavirus pandemic on the world economy and human life in general is noted. The main changes in the economy and society, which caused changes in the volume of foreign trade in Ukrainian goods, as well as the main reasons for the change in supply and demand, which are typical for all countries of the world, are allocated. The main directions of the State’s assistance to increase the volume of exports of goods from Ukraine in the context of the COVID-19 pandemic are defined. The negative and positive changes in Ukraine’s foreign trade caused by the coronavirus pandemic are characterized.

ASSESSING THE RELATIONSHIP BETWEEN INTERNATIONAL MARKET AND AGRICULTURAL COMMODITY EXPORT PRICES: EVIDENCE FROM VIETNAMESE COFFEE

Nghiên cứu sử dụng kiểm định đồng liên kết, quan hệ nhân quả Granger và mô hình VAR để xác định mối quan hệ giữa giá cà phê quốc tế trên thị trường giao ngay và giá cà phê Việt Nam xuất khẩu từ tháng 01 năm 2004 đến tháng 12 năm 2017. Nghiên cứu đã tìm thấy ảnh hưởng của giá cà phê thế giới lên giá cà phê Việt Nam xuất khẩu, nhưng không có chiều ngược lại. Hai biến này không có mối quan hệ đồng liên kết ở độ tin cậy 99%, nhưng kiểm định quan hệ nhân quả Granger lại chỉ ra rằng giá cà phê Việt Nam xuất khẩu chịu ảnh hưởng của của giá cà phê trên thị trường thế giới, nhưng giá cà phê trên thị trường thế giới lại không chịu ảnh hưởng bởi giá cà phê Việt Nam xuất khẩu. Những kết quả từ việc hồi quy mô hình VAR cũng chỉ ra rằng, biến phụ thuộc chịu ảnh hưởng của hai biến độc lập ở độ trễ 1 và các độ trễ khác. Tóm lại, giá cà phê Việt Nam xuất khẩu không hề có ảnh hưởng lên giá cà phê quốc tế trên thị trường giao ngay. Do vậy, mối quan hệ giữa hai biến là mối quan hệ phi đối xứng. Những kết quả nghiên cứu này phù hợp với thực tế, mặc dù Việt Nam là quốc gia xuất khẩu cà phê robusta lớn nhất nhưng lại chỉ là một nước “nhỏ” không có bất cứ sức mạnh thị trường nào trên thị trường cà phê thế giới.

Introduction

In an era of commodity export–led growth, coffee served as the engine behind the city of São Paulo’s phenomenal expansion during the late nineteenth and early twentieth centuries. The city had incredible ethnic, racial, and national diversity for the hemisphere, and São Paulo became an important Transatlantic and Southern Cone immigration node for families. To fully appreciate this diversity, São Paulo’s population cannot be reduced into black/white or immigrant/Brazilian binaries. This is not to suggest that discrimination did not exist. On the contrary, the introduction concludes by challenging economic historians to delve more deeply into lived experiences and into understanding the role of persistent prejudice and discrimination in persistent Latin American inequality and underdevelopment. Similarly, it urges cultural and social historians to consider how using New Economic History methodologies to examine working-class lives can provide insight into archival silences and help to recover embedded narratives.

The Sources of Fiscal Fluctuations

This paper assesses the dynamic impact of global macroeconomic conditions, commodity price movements, shifts in portfolio preferences, and domestic shocks on fiscal outcomes—notably the budget deficit, its main components, and debt—across a wide range of countries. Heterogeneity is investigated across the level of development and other structural characteristics. Dynamics are explored via panel local projections, while robustness is assessed via dynamic panel and system GMM regressions. World growth, financial risk appetite, political events, and commodity export prices are key determinants of fiscal outcomes in EM, while domestic growth, commodity import prices, and banking crises appear to matter more in AE. Our estimates help quantify the amount of fiscal risk generated by various factors, and thus provide inputs for the design of potential insurance mechanisms or state-contingent debt instruments that could assist in smoothing fiscal fluctuations.

Commodity Production and Indigenous Institutions in Southeast Asian Long-Run Economic Development

The Making of a Periphery makes three important claims. First, commodity export production does not necessarily result in peripheralization, which is defined as economic stagnation, depressed wages and impoverishment. Second, peripheralization is instead influenced by the specific mode of production of export commodities. Third, the mode of production is crucially determined by demographic growth and patron-client relationships. This essay investigates these claims using a variety of economic and demographic data on Southeast Asia in the nineteenth and twentieth centuries. It is shown that specialization in primary commodity exports does lower long-term economic growth rates and that indigenous institutions regarding family systems and property rights play an important role in the patterns of economic development.

Commodity price volatility and economic growth in Africa: the mitigating role of trade policy

The extreme volatile behavior of Africa’s output and consumption is strongly related to the extent of exposure to external shocks in its trade earnings. The volatility of export earnings inherent in African economies depicts trade and export structure not diversified, and the need for development managers in easing the over-arching dependence on commodity exports earnings as a major source of budget financing. This study investigates the effect of commodity price volatility on real GDP using a longitudinal data covering fifty-three African commodity-dependent countries for the period 1970–2017. The theoretical framework is premised on the neoclassical growth model, and the system generalized method of moments (SGMM) estimation technique was adopted. The results from the estimation procedure indicate a negative contemporaneous relationship between commodity price volatility and growth. However, the intervention of policy instruments such as contrasting openness degree signals short-run relief for commodity export-dependent economies, as trade policy mitigates the adverse effect of commodity price volatility on growth.