New financial markets and their impact on raw material prices

Marek Szturo, Bogdan Włodarczyk

Abstract


The purpose of the study was to determine the impact of the Chinese financial market, which is a new market, on the exchange rates of commodity currencies and, thus, the prices of raw materials. For this purpose, an autoregressive distributed lag model (ARDL) was used. The results indicate that the Chinese stock market and futures market for the yuan (the Chinese Yuan Non-Deliverable Forward Transactions; CNY NDF market) had a significant impact on commodity currencies before the global financial crisis in 2008/09, then the effect widened to include more commodity currencies in the post-crisis period. Further evidence suggests that the CNY NDF market had a greater impact on commodity currencies than the Chinese stock market. Despite the significant position of the Chinese economy, research also indicates that the impact of Chinese financial markets on commodity currencies (raw material prices) is weaker than the impact of the US stock market and US dollar market.


Keywords


financial markets; commodity currencies; raw material markets

Full Text:

PDF

References


Bodart, V., Candelon, B., & Carpantier, J. (2012). Real exchanges rates in commodity producing countries: A reappraisal. Journal of International Money and Finance, 31(6), 1482–1502. doi:10.1016/j.jimonfi.2012.02.012

Cashin, P., Céspedes, L.F., & Sahay, R. (2004). Commodity currencies and the real exchange rate. Journal of Development Economics, 75(1), 239–268. doi:10.1016/j.jdeveco.2003.08.005

Chen, Y.C. (2005). Exchange rates and fundamentals: Evidence from commodity currencies. University of Washington Working Paper. Retrieved from http://faculty.washington.edu/yuchin/Papers/ERF_ychen.pdf [access: 10.02.2019].

Dauvin, M. (2014). Energy prices and the real exchange rate of commodity-exporting countries. The International Economy, 137, 52–72. doi:10.1016/j.inteco.2013.11.001

Ferraro, D., Rogoff, K., & Rossi, B. (2015). Can oil prices forecast exchange rates? An empirical analysis of the relationship between commodity prices and exchange rates. Journal of International Money and Finance, 54, 116–141. doi:10.1016/j.jimonfi.2015.03.001

Friedman, M. (1951). Commodity-reserve currency. Journal of Political Economy, 59(3), 203–232.

Hayek, F.A. (1943). A commodity reserve currency. The Economic Journal, 53(210–211), 176–184.

Liu, L. G., & Pauwels, L. (2012). Do external political pressures affect the Renminbi exchange rate? Journal of International Money and Finance, 31, 1800–1818. doi:10.1016/j.jimonfi.2012.04.001

Meese, R., & Rogoff, K. (1983). Empirical exchange rate models of the seventies: Do they fi out of sample? Journal of International Economics, 14(1–2), 3–24. doi:10.1016/0022-1996(83)90017-X

Pershin, V., Molero, J.C., & Gracia, D. (2016). Exploring the oil prices and exchange rates nexus in some African economies. Journal of Policy Modeling, 38(1), 166–180.doi:10.1016/j.jpolmod.2015.11.001

Pesaran, M.H., & Shin, Y. (1996). Cointegration and speed of convergence to equilibrium. Journal of Econometrics, 71, 117–143. doi:10.1016/0304-4076(94)01697-6

Pesaran, M.H., & Smith, R. (1998). Structural analysis of cointegration VARs. Journal of Economic Surveys, 12(5), 471–505. doi:10.1111/1467-6419.00065

Pesaran, M.H., Shin, Y., & Smith, R. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. doi:10.1002/jae.616

Zhang, H.J., Dufour, J.M., & Galbraith, J.W. (2016). Exchange rates and commodity prices: Measuring causality at multiple horizons. Journal of Empirical Finance, 36, 100–120. doi:10.1016/j.jempfi.2015.10.005




DOI: http://dx.doi.org/10.17951/h.2019.53.3.85-92
Date of publication: 2019-11-28 14:18:22
Date of submission: 2019-05-17 16:59:39


Statistics


Total abstract view - 1186
Downloads (from 2020-06-17) - PDF - 0

Indicators



Refbacks

  • There are currently no refbacks.


Copyright (c) 2019 Marek Szturo, Bogdan Włodarczyk

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.