Can exchange rates forecast commodity prices?

We show that "commodity currency" exchange rates have surprisingly robust power in predicting global commodity prices, both in-sample and out-of-sample, and against a variety of alternative benchmarks. This result is of particular interest to policy makers, given the lack of deep forward markets in many individual commodities, and broad aggregate commodity indices in particular. We also explore the reverse relationship (commodity prices forecasting exchange rates) but find it to be notably less robust. We offer a theoretical resolution, based on the fact that exchange rates are strongly forward-looking, whereas commodity price fluctuations are typically more sensitive to short-term demand imbalances. © 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

On the multiple ecological roles of water in river networks

The distribution and movement of water can influence the state and dynamics of terrestrial and aquatic ecosystems through a diversity of mechanisms. These mechanisms can be organized into three general categories wherein water acts as (1) a resource or habitat for biota, (2) a vector for connectivity and exchange of energy, materials, and organisms, and (3) as an agent of geomorphic change and disturbance. These latter two roles are highlighted in current models, which emphasize hydrologic connectivity and geomorphic change as determinants of the spatial and temporal distributions of species and processes in river systems. Water availability, on the other hand, has received less attention as a driver of ecological pattern, despite the prevalence of intermittent streams, and strong potential for environmental change to alter the spatial extent of drying in many regions. Here we summarize long-term research from a Sonoran Desert watershed to illustrate how spatial patterns of ecosystem structure and functioning reflect shifts in the relative importance of different 'roles of water' across scales of drainage size. These roles are distributed and interact hierarchically in the landscape, and for the bulk of the drainage network it is the duration of water availability that represents the primary determinant of ecological processes. Only for the largest catchments, with the most permanent flow regimes, do flood-associated disturbances and hydrologic exchange emerge as important drivers of local dynamics. While desert basins represent an extreme case, the diversity of mechanisms by which the availability and flow of water influence ecosystem structure and functioning are general. Predicting how river ecosystems may respond to future environmental pressures will require clear understanding of how changes in the spatial extent and relative overlap of these different roles of water shape ecological patterns. © 2013 Sponseller et al.