Effective cross-hedging for commodity currencies
There has been little evidence in the past to support the use of commodity-currency cross-hedges (Demaskey and Pearce, 1998; Benet, 1990; Eaker and Grant, 1987). However, this paper shows that if currencies can be defined as commodity currencies, as per Chen and Rogoff (2003) and Cashin, Céspedes and Sahay (2004), commodity currency cross-hedges are effective and beneficial. Two commodity currencies, the Papua New Guinea kina and the Australian dollar, are shown here to be effectively hedged...[Show more]
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