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Exchange Rates, Foreign Income, and U.S. Agriculture

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  • Shane, Mathew
  • Roe, Terry L.
  • Somwaru, Agapi

Abstract

This paper focuses on estimating the effects of trade partner income and real trade-weighted exchange rates on US agricultural exports. For the period 1970-2003, a one percent annual increase in trade partners’ income is found to increase total agricultural exports by about 1.6 percent while a one percent appreciation of the dollar relative to trade partner trade-weighted currencies decreases total agricultural exports by about 0.8 percent. We find these effects also carry over to 12 commodity subcategories, although the effects are conditioned by differences between bulk and high value commodities, and differences in the export demand from high compared to low income countries. We also find that the negative effect of exchange rate appreciation on exports often dominates the positive effect from income growth.

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Bibliographic Info

Paper provided by University of Minnesota, Center for International Food and Agricultural Policy in its series Conference Papers with number 6686.

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Date of creation: Aug 2006
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Handle: RePEc:ags:umcicp:6686

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Keywords: Exchange rates; U.S. agricultural trade; U.S. agricultural commodity exports; U.S. agricultural export prices; foreign income; International Relations/Trade; F10; F14; Q17;

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References

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  1. Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," Center for International and Development Economics Research, Working Paper Series, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkele qt5t38s42v, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  2. V. V Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 533-563.
  3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195060119, October.
  4. Xinshen Diao & Terry Roe & Agapi Somwaru, 2001. "What is the Cause of Growth in Regional Trade: Trade Liberalisation or RTAs? The Case of Agriculture," The World Economy, Wiley Blackwell, vol. 24(1), pages 51-79, 01.
  5. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, Elsevier, vol. 11(1), pages 63-79, February.
  6. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
  7. Orden, David, 1986. "Agriculture, trade, and macroeconomics: The U.S. case," Journal of Policy Modeling, Elsevier, Elsevier, vol. 8(1), pages 27-51.
  8. Keblowski, Piotr & Welfe, Aleksander, 2004. "The ADF-KPSS test of the joint confirmation hypothesis of unit autoregressive root," Economics Letters, Elsevier, vol. 85(2), pages 257-263, November.
  9. Babula, Ronald A. & Bessler, David A. & Payne, Warren S., 2004. "Dynamic Relationships Among U.S. Wheat-Related Markets: Applying Directed Acyclic Graphs to a Time Series Model," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
  10. repec:jaa:jagape:v:36:y:2004:i:1:p:1-22 is not listed on IDEAS
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Cited by:
  1. Gehlhar, Mark J. & Dohlman, Erik & Brooks, Nora & Jerardo, Alberto & Vollrath, Thomas L., 2007. "Global Growth, Macroeconomic Change, and U.S. Agricultural Trade," Economic Research Report 55963, United States Department of Agriculture, Economic Research Service.
  2. Durmaz, Nazif & Thompson, Henry, 2010. "Textile Producer Cotton Imports and the Exchange Rate," MPRA Paper 21831, University Library of Munich, Germany.

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