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Abstract
This paper examines the structural relationship between U.S. agricultural exports, foreign GDP
growth, and real exchange rate volatility, and the impact of exogenous shocks on the evolution of
export growth to examine the sector's international competitiveness and opportunities for export
extensification. The long- and short-run dynamics of export demand are analyzed within the
structural cointegrating vectorautoregressive framework. Principal findings are that: 1. Exports
of high-value processed agricultural products are more sensitive to changes in foreign income and
exchange rate fluctuations than exports of low-value grains and bulk commodities. Specifically,
a 10% growth in trade-adjusted GDP across all importing countries leads to a 7.8% increase in
U.S. exports of bulk commodities compared to 33% increase in exports of high-value processed
commodities. Similarly, a 10% increase in the value of the trade-weighted exchange rate (i.e.,
an appreciation of the U.S. dollar) reduces bulk exports by 8.4% compared to a whopping 35%
decline in high-value processed food exports; 2. In response to exogenous shocks, deviations from
the predicted equilibrium level of exports are corrected at a much faster rate for grains and other
bulk commodity exports than export of high value commodities. For example, more than 75% of
the disequilibrium in aggregate bulk commodity exports is corrected within one year; less than
15% of the disequilibrium in high-value processed exports is corrected within a year. 3. The
present concentration of U.S. agricultural commodity exports to a few developed countries is
increasingly problematic, U.S. agricultural exports may benefit not only from policies intended
to increase trade with existing developing country importers but also from policies that aim to
export agricultural commodities to emerging markets. Our paper also highlights the importance
of including the long-run relationship when modeling the short-run dynamics.