After the tide: Commodity currencies and global trade

摘要

The decade prior to the Great Recession saw a boom in global trade and rising transportation costs. High-yielding commodity exporters' currencies appreciated, boosting carry trade profits. The Global Recession sharply reversed these trends. We interpret these facts with a two-country general equilibrium model that features specialization in production and endogenous fluctuations in trade costs. Slow adjustment in the shipping sector generates boom-bust cycles in freight rates and, as a consequence, in currency risk premia. We validate these predictions using global shipping data. Our calibrated model explains about 57% of the narrowing of interest rate differentials post-crisis. (C) 2016 Elsevier B.V. All rights reserved.