Regime-Dependent Relationships Between Commodity Price Volatility and Exchange Market Pressure in Commodity-Exporting Countries

Mohammad Javad  Ghaderi Ardakani; Zohreh Tabatabaei Nasab; Seyed Yahya  Abtahi; Mohammad Ali  Dehghan Tafti

Authors

Mohammad Javad Ghaderi Ardakani Ph.D. student, Department of Economics, Ya.C., Islamic Azad University, Yazd, Iran Author https://orcid.org/0009-0006-6135-1551
Zohreh Tabatabaei Nasab Department of Economics, Ya.C., Islamic Azad University, Yazd, Iran https://orcid.org/0000-0003-3043-0151
Seyed Yahya Abtahi Department of Economics, Ya.C., Islamic Azad University, Yazd, Iran Author https://orcid.org/0000-0002-4034-5439
Mohammad Ali Dehghan Tafti Department of Economics, Ya.C., Islamic Azad University, Yazd, Iran Author https://orcid.org/0009-0005-2641-1793

Keywords:

exchange market pressure, commodity price volatility, panel quantile regression, Panel Smooth Transition Regression, commodity-exporting countries, regime-dependent effects

Abstract

This article examines the nonlinear and regime-dependent relationship between commodity price volatility and exchange market pressure (EMP) in 53 commodity-exporting countries over the period 1980–2023. The principal contribution of the study lies in two aspects: first, the use of the EMP index rather than the real effective exchange rate, thereby providing a more comprehensive representation of pressures in the foreign exchange market; and second, the application of panel quantile regression as a complementary method alongside the Panel Smooth Transition Regression (PSTR) model. The findings indicate that although the PSTR model confirms the existence of a nonlinear relationship, it cannot produce statistically significant coefficients for price volatility. By contrast, quantile regression estimates for five quantiles (0.10, 0.25, 0.50, 0.75, and 0.90) demonstrate that the effect of price volatility is highly dependent on the exchange market pressure regime and the type of commodity. The metals panel, with a coefficient of 0.283 at the 10th percentile, was identified as the most sensitive panel. The raw materials panel exhibits a unique dual pattern, in which price volatility has a stabilizing effect during currency crises but an amplifying effect under high-pressure conditions. In the energy panel, price volatility has an amplifying effect during currency crises but no statistically significant effect under normal conditions. The food panel is the only panel in which price volatility has a stabilizing effect. The findings demonstrate that an accurate understanding of regime dependence and commodity-type dependence is essential for designing effective exchange-rate policies. Based on the results, tailored policy recommendations are proposed for each group of countries, including establishing stabilization funds, reducing fiscal dependence on commodity revenues, diversifying exports, and strengthening central bank independence.

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