Description

This paper examines the determinants of the copper price and the Chilean terms of trade, with special focus on the industrialized economies' real exchange rates. It also estimates the effects of world economic activity on the copper price and terms of trade. Empirical results show that, in the long run, a 10% real depreciation of the US dollar yields an 18% increase in the real copper price and a 12% increase in the terms of trade. Moreover, a 1% increase in world economic growth, generates increases of 0.14% in the real copper price and 0.24% in the terms of trade.