The Link between the U.S. Dollar Real Exchange Rate, Real Primary Commodity Prices, and LDCS' Terms of Trade

Abstract

The correlation between a real appreciation of the U.S. dollar and a decline in U.S. relative primary commodity prices does not imply that such an appreciation leads to a deterioration in the terms of trade of commodity producing LDCs. In fact, empirical results reported in this note suggest that the dollar appreciation has had a beneficial impact on these countries' terms of trade.