Commodity price effects on currencies

• Commodity price effect is non-uniform and changes over time. Diverse sectoral commodity effects are robust to alternative specifications. affected by crisis third-country exchange rates. The empirical results challenge the assumption of stable effects. Using quarterly data on four commodity-exporting countries, we examine explanatory power real prices predict effective rates, paying particular attention separate roles varied during time periods. We determine that nonuniform across countries sectors varies use fixed-weight indexes or nominal rates yields heterogeneous Furthermore, pattern influenced presence macroeconomic conditions, crises, leading trading partners. These highlight challenges associated with explaining diverse currency behaviors different periods using a single commodity-price-based rate model. In addition, these findings suggest policymaking assuming difficult.