Saturday, March 10, 2012

Correlation between Copper and Chilean Peso (1)

In September 2009, the Chilean National Bank (Banco Central de Chile) provided a good summary of the dependency of the Chilean economy on copper exports

The main theme of the presentation is that while copper continues to be very important, the growth of non-copper exports have gained higher importance and that Chile has managed its natural resource curse successfully.

The latter is probably true, but because of elevated copper prices for the last couple of years the copper exports as a percentage of total export have actually increased and now stood at 55% in 2011 (data source 1996-2010, 2011 own estimates, note that manufactured copper products like copper wire are included under 'Other').

















This is reflected in higher correlation between Copper and Chilean Peso (CLP) in most recent years (2001-2011 compared to 1990-2000). R2 has increased from 41% to 69%, the absolute value of beta has increased from 13% to 24% (reading example: a 10% increase in Copper prices leads to a 2.4% strengthening of the CLP [CLPUSD decreasing]).



2 comments:

  1. Interesting. Can you expand the analysis:
    1) Export share back to 1990 (in line with correlation analysis)
    2) How much of "other" exports are also commodity based (cellulose, agro etc)?
    3) How to R2 and Beta change over time based on monthly data points?

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    Replies
    1. Thank you. I have released a post answering your first and second question.

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