• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2013 Vol.4(5): 265-269 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2013.V4.298

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

Omar K. M. R. Bashar and Sarkar Humayun Kabir
Abstract—This study seeks to identify major factors behind recent fluctuations in Australian dollar. Using quarterly data for over 30 years and cointegration and error correction models, we found that in the long run exchange rate is determined by commodity prices, interest rate and other factors such as Global Financial Crisis. We found two-way Granger causality between exchange rate and commodity prices, but one-way Granger causality from Global Financial Crisis to commodity prices. The implications of our findings is that by providing substantial incentives to Australian producers, the policy makers in Australia can ensure competitive commodity prices and exchange rate. Portfolio managers could also benefit from our findings knowing the mechanism of Global Financial Crisis impacting Australian dollar.

Index Terms—Commodity prices, exchange rate, global financial crisis, cointegration.

Omar K. M. R. Bashar is with Swinburne University of Technology, Australia (e-mail: obashar@swin.edu.au). Sarkar Humayun Kabir is with The Global University of Islamic Finance (INCEIF), Malaysia.

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Cite:Omar K. M. R. Bashar and Sarkar Humayun Kabir, "Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia," International Journal of Trade, Economics and Finance vol.4, no.5, pp. 265-269, 2013.

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