Is the brazilian real a commodity currency? Large sample empirical evidence

Brazil is one of the world’s largest base materials exporters, and this paper examines through large time series samples whether the Brazilian Real can be characterized as a commodity currency. The Real/US dollar real exchange rate and a real commodity prices index are found to be non-stationary and not cointegrated, while a risk premium appeared to have a large and statistically significant long term relationship with exchange rate movements. Combined first difference models showed that real exchange rate elasticity to risk premium is twice as large as to commodity prices, although both variables have considerable influence. Some specifications outperformed a random walk model with respect to root mean square forecast errors for many horizons, but the latter still better determined the exchange rate in longer terms

IS THE BRAZILIAN REAL A COMMODITY CURRENCY? LARGE SAMPLE EMPIRICAL EVIDENCE

<p>Brazil is one of the world’s largest base materials exporters, and this paper examines through large time series samples whether the Brazilian Real can be characterized as a commodity currency. The Real/US dollar real exchange rate and a real commodity prices index are found to be non-stationary and not cointegrated, while a risk premium appeared to have a large and statistically significant long term relationship with exchange rate movements. Combined first difference models showed that real exchange rate elasticity to risk premium is twice as large as to commodity prices, although both variables have considerable influence. Some specifications outperformed a random walk model with respect to root mean square forecast errors for many horizons, but the latter still better determined the exchange rate in longer terms.</p

Macroeconomic Policy, Growth and Income Distribution in the Brazilian Economy in the 2000s

The Brazilian economy grew by 4.2 percent annually from 2004-2010, more than double its annual growth from 1999-2003 or indeed its growth rate over the prior quarter century. This growth was accompanied by a significant reduction in poverty and extreme poverty, especially after 2005, as well as reduced inequality. This paper looks at the combination of external changes and changes in macroeconomic policy that contributed to these results

The Role Of Latin American Banks In The Region’s Currency Crises

The frequency of currency crises in Latin America has not abated in the last few years, as the Mexican Peso crises of 1982 and 1995, the Brazilian Real Crisis of 1998 and the Argentine Peso crisis of 2001 attest. Although many factors are involved in these crises, Latin American banks have played an important, yet previously unstudied role in the frequency and severity of the region’s financial crises. This paper examines four of the most recent currency crises in the region to determine if there are any commonalities or root causes to be found in the region’s banking system. It is found that, indeed, the region’s banks have had a profound role.Currency crises, Latin America, Banking

MONETARY POLICY AND EXTERNAL VULNERABILITY IN BRAZIL

This paper analyses monetary policy in Brazil, investigating why interest rates were so high and volatile from 1995 to 1998. We identify in monetary policy an overreaction to external shocks, where exogenous changes in international liquidity triggered sharp movements on domestic interest rates. We also show that the Brazilian policy response to these shocks was far more intense than in Argentina and Mexico. We argue that Brazil was caught in a high interest rates trap, which culminated in a currency crisis in January 1999.

Export Market Pricing Decisions and Market Power in World Grain Markets: A Duopoly Model for Soybeans

Replaced with revised version of paper 02/13/07.Marketing,

Episodic Nonlinearity in Leading Global Currencies

We perform non-linearity tests using daily data for leading currencies that include the Australian dollar, British pound, Brazilian real, Canadian dollar, euro, Japanese yen, Mexican peso, and the Swiss franc to resolve the issue of whether these currencies are driven by fundamentals or exogenous shocks to the global economy. In particular, we use a new method of testing for linear and nonlinear lead/lag relationships between time series, introduced by Brooks and Hinich (1999), based on the concepts of cross-correlation and cross-bicorrelation. Our evidence points to a relatively rare episodic nonlinearity within and across foreign exchange rates. We also test the validity of specifying ARCH-type error structures for foreign exchange rates. In doing so, we estimate Bollerslevs (1986) general- ized ARCH (GARCH) model and Nelsons (1988) exponential GARCH (EGARCH) model,using a variety of error densities [including the normal, the Student-t distribution, and the Generalized Error Distribution (GED)] and a comprehensive set of diagnostic checks. We apply the Brooks and Hinich (1999) nonlinearity test to the standardized residuals of the optimal GARCH/EGARCH model for each exchange rate series and show that the nonlinearity in the exchange rates is not due to ARCH-type e¤ects. This result has important implications for the interpretation of the recent voluminous literature which attempts to model fi nancial asset returns using this family of models.Global nancial markets; Currencies; Episodic nonlinearity; Conditional heteroskedasticity.