Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan

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Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan

Author Info

Jacinto F. Fabiosa () (Center for Agricultural and Rural Development (CARD), Food and Agricultural Policy Research Institute (FAPRI))

Abstract

A model of a representative Canadian pork exporter is developed to examine the impacts of the exchange rate and its volatility on pork and live swine exports. The pork export supply equation is expressed as a function of the expected level of real exchange rate and a time-varying variance of real exchange rate. An AR(p) model is used to represent the expected real exchange rate, and a GARCH(p, q) model is used to generate the time-varying variance. The same model is used to examine the sensitivity of pork exports to Japan from Canada, the United States, and Denmark. The parameters of all pork and live swine export equations have theoretically consistent signs and many are significant. That is, the domestic price in the exporting country has a negative effect on exports because it is a major input price in the exporter's cost function while the price in the market of destination has a positive effect. The level of the exchange rate has a positive impact on pork exports while the volatility of the exchange rate has a negative impact. Most of the volatility parameters are not significant.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 02-wp305.

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Date of creation: Jun 2002
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Handle: RePEc:ias:cpaper:02-wp305

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Dermot J. Hayes & Roxanne Clemens, 1999. "Market for U.S. Meat Exports in Eastern Canada, The," Center for Agricultural and Rural Development (CARD) Publications 99-wp229, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
Asseery, A. & Peel, D. A., 1991. "The effects of exchange rate volatility on exports : Some new estimates," Economics Letters, Elsevier, vol. 37(2), pages 173-177, October. [Downloadable!] (restricted)
Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April. [Downloadable!] (restricted)
Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July. [Downloadable!] (restricted)
Chowdhury, Abdur R, 1993. "Does Exchange Rate Volatility Depress Trade Flows? Evidence from Error-Correction Models," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 700-706, November. [Downloadable!] (restricted)

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Zhang, Qiang & Reed, Michael R., 2006. "The Impact of Multiple Volatilities on Import Demand for U.S. Grain: The Case of Soybeans," 2006 Annual meeting, July 23-26, Long Beach, CA 21079, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]

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