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Research on Commodities and Finance for Economic Development

We are a group of academic researchers working on commodity and finance issues in low income countries and emerging economies. Not only are the interrelationships between trade, monetary and financial issues at the forefront of long-standing academic debate, but they are also at the centre of ongoing discussions in international negotiating and policy fora. As a group of researchers our aim is to contribute to these debates and to add fresh insight, posing new questions and adopting new approaches to the study of commodities and finance for economic development.

Interest in commodity issues and the interplay of commodity and financial markets have seen a revival in recent times, although policy prescriptions and consensus on ways forward are far from clear. Continued research on the origin of commodity price instability and the processes of price realisation in these markets is important. Understanding the effects of unstable commodity prices (both from a micro and macro perspective) in commodity-dependent low income countries is therefore vital. Finally, gaining a deeper understanding of the potential role of non-traditional commodity exports in low-income countries is an essential part of the group’s research endeavours. A combination of quantitative, econometric and detailed case study methods allows us to provide a richer understanding of these processes and to put forward alternative policy prescriptions. To highlight the role of the real exchange rate as a development tool, research also focuses on the appropriate exchange rate regime in commodity-dependent countries, where large swings in export prices lead to misalignments in real exchange rates and consequent distortions in trade and productive structures.

A second major part of the group’s research work concentrates on the disruptive effects of financial instability and crises on emerging markets and developing countries; the trade-distorting effects of currency misalignments; and the importance of understanding financial and banking sector development in specific settings. Against the background of the asserted link between financial liberalisation and the frequent occurrence of currency, banking and financial crises that pose a severe challenge to the capacity of emerging market economies to macro-manage their internal and external accounts, research also analyses the appropriateness of different exchange rate regimes and forms of capital management in forestalling or dealing with crisis situations in emerging markets. The importance of learning from successful country experiences in dealing with international capital flows and financial crisis is an additional part of ROCFED’s work. Finally, a micro-level study underlines our general findings on the importance of understanding the specificities of financial sector development in particular contexts.