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Exploring The Transmission Of International And Domestic Economic Shocks To U.S. Agriculture

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  • Moledina, Amyaz A.
  • Roe, Terry L.

Abstract

As growth in world trade outpaces the growth in world Gross Domestic Product (GDP), economies are becoming ever more linked through world markets (Helpman, 1998). It is evident that U.S. agriculture is also becoming increasingly affected by changes or economic shocks in world markets and that this response is conditional on the response of other sectors with which it must compete for economy-wide resources. This paper links the U.S. agricultural sector with its bilateral trading partners by deriving "shock transmission functions". These functions link the direct effects of world economic shocks to the price of four U.S. (export) commodities namely meat, dairy, grains and crops. We derive a price equation that is a function of the product of income between the United States and it's trading partner among other explanatory variables. The coefficient estimates from these equations can be interpreted as price transmission elasticities. These elasticities are used to conduct policy experiments.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2000 Annual meeting, July 30-August 2, Tampa, FL with number 21751.

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Date of creation: 2000
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Handle: RePEc:ags:aaea00:21751

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Keywords: International Relations/Trade;

References

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  1. Elhanan Helpman, 1998. "Explaining the structure of foreign trade: Where do we stand?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(4), pages 573-589, December.
  2. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
  3. V. Eldon Ball & Jean-Christophe Bureau & Richard Nehring & Agapi Somwaru, 1997. "Agricultural Productivity Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1045-1063.
  4. Gopinath, Munisamy & Roe, Terry L., 1999. "Modeling inter-sectoral growth linkages: An application to U.S. agriculture," Agricultural Economics, Blackwell, vol. 21(2), pages 131-144, October.
  5. Premachandra Athukorala & James Riedel, 1991. "The small country assumption: A reassessment with evidence from Korea," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 138-151, March.
  6. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, vol. 30(3-4), pages 301-316, May.
  7. Munisamy, Gopinath & Roe, Terry L., 1995. "General Equilibrium Analysis of Supply and Factor Returns in U.S. Agriculture, 1949-91," Bulletins 7516, University of Minnesota, Economic Development Center.
  8. Xinshen Diao & Wenli Li & Erinc Yeldan, 2000. "How the Asian crisis affected the world economy : a general equilibrium perspective," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 35-59.
  9. Mundlak, Yair & Larson, Donald F, 1992. "On the Transmission of World Agricultural Prices," World Bank Economic Review, World Bank Group, vol. 6(3), pages 399-422, September.
  10. Morisset, Jacques, 1998. "Unfair Trade? The Increasing Gap between World and Domestic Prices in Commodity Markets during the Past 25 Years," World Bank Economic Review, World Bank Group, vol. 12(3), pages 503-26, September.
  11. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
  12. Jakob Madsen, 1998. "Errors-in-variables, supply side effects, and price elasticities in foreign trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(4), pages 612-637, December.
  13. Chipman, John S & Tian, Guoqiang, 1992. "A General-Equilibrium Intertemporal Model of an Open Economy," Economic Theory, Springer, vol. 2(2), pages 215-46, April.
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Cited by:
  1. Moledina, Amyaz A. & Roe, Terry L. & Shane, Mathew, 2004. "Measuring Commodity Price Volatility And The Welfare Consequences Of Eliminating Volatility," 2004 Annual meeting, August 1-4, Denver, CO 19963, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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