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       Agricultural and Resource Economics Review (continues the Northeastern Journal of Agricultural and Resource Economics) >
          Volume 37, Number 2, October 2008 >

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Title: Exchange Rates, Foreign Income, and U.S. Agricultural Exports
Authors: Shane, Mathew
Roe, Terry L.
Somwaru, Agapi
Keywords: exchange rates
U.S. agricultural trade
U.S. agricultural commodity exports
U.S. agricultural export prices
foreign income
Issue Date: 2008
Abstract: While it is generally accepted that change in the real value of the dollar is an important determinant of exports, it has not been rigorously demonstrated that this relationship, derivable from theory, holds empirically for agricultural exports and the components of agricultural exports. Starting with a dynamic maximizing framework, this paper estimates the real trade-weighted exchange rate and trade partner income effects on U.S. agricultural exports. For the period 1970–2006, a one percent annual increase in trade partners’ income is found to increase total agricultural exports by about 0.75 percent, while a one percent appreciation of the dollar relative to trade partner trade-weighted currencies decreases total agricultural exports by about 0.5 percent. While these effects carry over to 12 commodity subcategories, they are conditioned by differences between bulk and high value commodities, and differences in the export demand from high compared to low income countries. We use a directed acyclic graphs (DAG) technique to identify the inverted fork causal relationships from vector autoregression (VAR) models. We also find that there is an asymmetric exchange rate effect so that the negative effect of exchange rate appreciation on exports sometimes dominates the positive effect of foreign income growth.
Institution/Association: Agricultural and Resource Economics Review>Volume 37, Number 2, October 2008
Total Pages: 16
From Page: 160
To Page: 175
Collections:Volume 37, Number 2, October 2008

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