Commodity Price Volatility Across Exchange Rate Regimes

This paper documents a new "stylized fact" regarding commodity prices using alternative datasets covering the period from 1880 to 1996: The volatility of real commodity prices, defined as nominal commodity prices deflated by the manufacturing unit value index, is higher under flexible-exchange rate regimes than fixed-exchange rate regimes. Furthermore, changes in exchange regime are associated with changes in the persistence of commodity price shocks. Implications of this finding for open-economy macro modeling are briefly discussed in the concluding section.