Commodity currencies and commodity prices

modelling static and time-varying dependence

Katja Ignatieva*, Natalia Ponomareva

*Corresponding author for this work

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

This article employs the copula approach to study the relationship between exchange rates and commodity prices for large commodity exporters. Using data for the nominal exchange rates of four commodity currencies (Australian, Canadian and New Zealand dollars, and Norwegian krone) against the US dollar and the relevant country-specific commodity price indices, constructed on a daily basis, we find (1) a positive dependence between the values of commodity currencies and commodity indices, i.e. a commodity index increases when a respective currency appreciates and provides several explanations for this finding; (2) no major asymmetries in the tail dependence for most pairs of exchange rates and commodity indices and (3) a pronounced increase in the time-varying tail dependence following the global financial crisis.

Original languageEnglish
Pages (from-to)1491-1512
Number of pages22
JournalApplied Economics
Volume49
Issue number15
DOIs
Publication statusPublished - 28 Mar 2017

Keywords

  • commodity prices
  • copulas
  • dependence modelling
  • Independently floating exchange rates

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