Real exchanges rates, commodity prices and structural factors in developing countries

•We provide new evidence on the dependence between real exchange rates and commodity prices in developing countries.•We study how the exchange rate regime, the financial and trade openness, the export diversification affect the dependence.•The dependence is smaller when a country operates a floating exchange rate, is open to capital flows and to external trade.•The magnitude of the dependence does not depend on whether the commodity is an agricultural good, a metal or oil.

This paper provides new empirical evidence about the relationship that may exist between real exchange rates and commodity prices in developing countries that are specialized in the export of a main primary commodity. It investigates how structural factors like the exchange rate regime, the degree of financial and trade openness, the degree of export concentration and the type of the commodity exports affect the strength of the commodity price-real exchange rate dependence.