currency, foreign-exchangeI’m looking for an economic model that could explain the exchange rate of the commodity currency for a country that exports a single commodity. Where should I look? Any hints are appreciated.
Pick one or two liquid commodity-currencies, and have a look in the literature - e.g. Norwegian Krone (oil) , Aussie Dollar (coal, other mining).
And see "Commodity Currencies" from the IMF's Quarterly magazine, from which I quote:
Developing countries reliant on commodity exports see the fate of their exchange rates tied to fickle commodity markets ... We asked two questions: Do real commodity prices and real exchange rates move together? And does the exchange regime affect a country's ability to cope with commodity price swings? ... It is not unexpected that sub-Saharan African countries, given their dependence on commodity exports, account for half the commodity-currency countries. Moreover, for these 22 countries, over 80 percent of the variation in the real exchange rate can, on average, be accounted for by movements in real commodity prices alone
But the usual rule applies: if a model's useful, it's not available; And if it's available, it's not useful. Trading is more profitable than academia, if your model's useful.
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