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Exchange Rate Dynamics and the Bilateral Trade Balance: The Case of U.S. Agriculture

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  • Baek, Jungho
  • Koo, Won W.
  • Mulik, Kranti

Abstract

This study examines the dynamic effects of changes in exchange rates on bilateral trade of agricultural products between the United States and its 15 major trading partners. Special attention is paid to investigate whether or not the J-curve hypothesis holds for U.S. agricultural trade. For this purpose, an autoregressive distributed lag (ARDL) approach to cointegration is applied to quarterly time-series data from 1989 and 2007. Results show that the exchange rate plays a crucial role in determining the short- and long-run behavior of U.S. agricultural trade. However, we find little evidence of the J-curve phenomenon for U.S. agricultural products with the United States’ major trading partners.

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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 38 (2009)
Issue (Month): 2 (October)
Pages:

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Handle: RePEc:ags:arerjl:55546

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Web page: http://www.narea.org/
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Related research

Keywords: agricultural trade; autoregressive distributed lag approach to cointegration; bilateral trade; J-curve effect; International Relations/Trade; Research Methods/ Statistical Methods;

References

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  3. Orden, David, 2000. "Exchange Rate Effects On Agricultural Trade And Trade Relations," Policy Harmonization and Adjustment in the North American Agricultural and Food Industry; Proceedings of the 5th Agricultural and Food Policy - 1999 16803, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
  4. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
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  16. Bessler, David A & Babula, Ronald A, 1987. "Forecasting Wheat Exports: Do Exchange Rates Matter?," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 397-406, July.
  17. Bahmani-Oskooee, Mohsen, 1985. "Devaluation and the J-Curve: Some Evidence from LDCs," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 500-504, August.
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