Commodity Prices and Exchange Rate Dynamics in Paraguay: An Empirical Analysis of USD/PYG, Soybean, and Cotton Prices

Title: Commodity Prices and Exchange Rate Dynamics in Paraguay: Evidence from Soybeans, Cotton, and the GuaraníAuthor: Jose Aurelio Fiorio WeberhoferAffiliation: Independent Researcher Abstract This working paper examines the relationship between Paraguay’s exchange rate (USD/PYG) and international commodity prices, with a particular focus on soybeans and cotton—two of the country’s most important export commodities. Using daily historical data and applied econometric techniques, the study investigates both bivariate and multivariate relationships between the Guaraní and commodity price movements. The analysis begins with separate bivariate regressions between USD/PYG and soybean prices, and USD/PYG and cotton prices, followed by a multivariate regression framework in which both commodities are included simultaneously as explanatory variables. The results reveal a strong and statistically significant negative relationship between the Guaraní exchange rate and international commodity prices, consistent with Paraguay’s status as a commodity-exporting economy. Higher global commodity prices are associated with Guaraní appreciation, reflecting improved export revenues and foreign currency inflows. The multivariate model improves explanatory power relative to bivariate specifications, highlighting the importance of considering multiple export channels when analyzing exchange rate dynamics in commodity-dependent economies. The findings contribute to the literature on commodity currencies, emerging market exchange rates, and applied macro-financial econometrics, offering policy-relevant insights for exchange rate management and export-driven growth strategies in Paraguay. This paper is intended as a working paper and exploratory empirical contribution, suitable for academic discussion, further extension, and comparative analysis with other commodity-exporting countries. Keywords Exchange rates; Commodity prices; Soybeans; Cotton; Paraguay; Guaraní; Commodity currencies; Applied econometrics; Emerging markets; Multivariate regression