Time: 13:00-15:00 (UK Time), Wednesday, 26 April 2023
Presenters: Dr Sophie van Huellen, University of Manchester & Dr Rafael Palazzi, São Paulo School of Business Administration, Getulio Vargas Foundation (FGV)
Chair: Professor Victor Murinde, SOAS University of London

Abstract
A strong co-movement between the currencies of commodity export-dependent economies and world commodity prices has been established as a stylised fact. However, the channels through which this close relationship arises remain contested. This paper contributes to unpicking the mechanisms that underpin commodity currencies by deriving a simple exchange rate model that identifies three potential channels through which commodity price fluctuations impact the exchange rate: (i) a terms-of-trade channel, (ii) a risk premium channel, and (iii) a liquidity premium channel. It is argued that different policy regimes and interventions lead to asymmetric and heterogeneous adjustments of the exchange rate over commodity boom and bust cycles. We empirically test for these asymmetries by use of a nonlinear autoregressive distributed lag (NARDL) model, taking four commodity-dependent economies with de jure flexible exchange rate regimes and open capital accounts as case studies: Brazil, Chile, Colombia, and South Africa. 

Presenters

Sophie van Huellen is a Lecturer in Development Economics with the Global Development Institute (GDI) at the University of Manchester. Her research focus is on primary commodity markets and commodity dependency, financialisation and macro-financial linkages. She obtained a BA in Economics, Politics and Philosophy from the University of Erfurt, Germany. She was further trained in economics (MSc and PhD) at SOAS University of London. 

Rafael Palazzi is a postdoctoral researcher at the São Paulo School of Business Administration, Getulio Vargas Foundation (FGV), with research interests in time series analysis, forecasting, commodity markets, and biofuel markets. He obtained his Ph.D. in Finance from the Pontifical Catholic University of Rio de Janeiro (PUC-Rio). He also holds a Master's, and BA degree in Economics.