Effects of a dollar appreciation on dollar prices in international commodity markets

Abstract

The dollar-based commodity price index prepared by UNCTAD declined by 30% in the five-year period ending in January 1985. A variety of factors explains this fall. Most important among these is probably the phenomenal appreciation of the US currency. For instance, the dollar rose against the Deutschmark by 84% during that time, and UNCTAD's commodity price index shows a rise of about 30% when measured in West German money. Surely, the dollar commodity prices would have fallen far less or possibly even increased in the absence of the exchange rate shifts that were actually recorded.