Impact of commodity price volatility on external debt: the role of exchange rate regimes

Monoj Kumar Majumder; Mala Valliammai Raghavan; Joaquin L. Vespignani

doi:10.1080/00036846.2021.1947960

Impact of commodity price volatility on external debt: the role of exchange rate regimes

Monoj Kumar Majumder, Mala Valliammai Raghavan, Joaquin L. Vespignani^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating exchange rate regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three-times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.

Original language	English
Pages (from-to)	6626-6640
Number of pages	15
Journal	Applied Economics
Volume	53
Issue number	57
DOIs	https://doi.org/10.1080/00036846.2021.1947960
Publication status	Published - 2021

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title = "Impact of commodity price volatility on external debt: the role of exchange rate regimes",

abstract = "This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating exchange rate regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three-times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.",

keywords = "Commodity price volatility, commodity-exporting countries, exchange rate regimes, external debt",

author = "Majumder, {Monoj Kumar} and Raghavan, {Mala Valliammai} and Vespignani, {Joaquin L.}",

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T2 - the role of exchange rate regimes

AU - Majumder, Monoj Kumar

AU - Raghavan, Mala Valliammai

AU - Vespignani, Joaquin L.

PY - 2021

Y1 - 2021

N2 - This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating exchange rate regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three-times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.

AB - This study explores the impact of commodity price volatility on external debt accumulation under fixed, managed, and floating exchange rate regimes. We estimate dynamic panel data models for 97 countries from 1993 to 2016. Our empirical findings show that commodity price volatility increases external debt accumulation for commodity-exporting countries. This impact is three-times higher for countries with fixed exchange rate regimes compared to managed floating exchange rate regimes. Under floating exchange regimes, the effect of commodity price volatility on external debt is statistically insignificant. Our results suggest that the adoption of a floating exchange rate regime by commodity-exporting countries is critical to mitigate the effects of commodity price volatility on external debt accumulation.

KW - Commodity price volatility

KW - commodity-exporting countries

KW - exchange rate regimes

KW - external debt

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VL - 53

SP - 6626

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JO - Applied Economics

JF - Applied Economics

IS - 57

ER -

Impact of commodity price volatility on external debt: the role of exchange rate regimes

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