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Granger Causality From The Exchange Rate To Agricultural Prices And Export Sales

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  • Bradshaw, Girard W.
  • Orden, David

Abstract

In-sample and out-of-sample Granger causality tests are applied to determine whether the real trade-weighted agricultural exchange rate helps predict monthly real prices and export sales of wheat, corn, and soybeans. An ARIMA model, alternative univariate and bivariate autoregressive models, and a restricted bivariate autoregressive model based on HsiaoÂ’s procedure are specified for each variable. Results of the causality are shown to be sensitive to specification choice. Forecasting performance of the models is compared and out-of-sample Granger causality is determined using univariate and bivariate models with the best (lowest mean-square forecast error) forecasting accuracy. These tests provide evidence supportive of Granger causality from the exchange rate to export sales, while the evidence on causality from the exchange rate to prices is mixed.

Suggested Citation

  • Bradshaw, Girard W. & Orden, David, 1990. "Granger Causality From The Exchange Rate To Agricultural Prices And Export Sales," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(01), July.
  • Handle: RePEc:ags:wjagec:32503
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    References listed on IDEAS

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    1. Orden, David, 1986. "Agriculture, trade, and macroeconomics: The U.S. case," Journal of Policy Modeling, Elsevier, vol. 8(1), pages 27-51.
    2. Dallas S. Batten & Michael T. Belongia, 1984. "The recent decline in agricultural exports: is the exchange rate the culprit?," Review, Federal Reserve Bank of St. Louis, issue Oct, pages 5-14.
    3. 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.
    4. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
    5. Dallas S. Batten & Michael T. Belongia, 1986. "Monetary Policy, Real Exchange Rates, and U.S. Agricultural Exports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 422-427.
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    Citations

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    Cited by:

    1. Kastens, Terry L. & Schroeder, Ted C., 1993. "Expectations of Cattle Feeding Investors in Feeder Cattle Placements," Staff Papers 118159, Kansas State University, Department of Agricultural Economics.
    2. Dhuyvetter, Kevin C., 2001. "Formula-Derived Versus Observed Market Prices: An Application For Segregated Early Weaned Pigs," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36145, Western Agricultural Economics Association.
    3. Goodwin, Barry K., 1992. "Forecasting Cattle Prices in the Presence of Structural Change," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(02), pages 11-22, December.
    4. 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.
    5. Baek, Jungho & Koo, Won W. & Mulik, Kranti, 2009. "Exchange Rate Dynamics and the Bilateral Trade Balance: The Case of U.S. Agriculture," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(02), pages 213-228, October.
    6. Baek, Jungho & Mulik, Kranti & Koo, Won W., 2006. "The J-Curve Phenomenon: Myth or Reality?," 2006 Annual meeting, July 23-26, Long Beach, CA 21382, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Orden, David, 2002. "Exchange Rate Effects on Agricultural Trade," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(02), pages 303-312, August.
    8. Jungho Baek & Won W. Koo, 2008. "Identifying Macroeconomic Linkages to U.S. Agricultural Trade Balance," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(1), pages 63-77, March.
    9. Zapata, Hector O. & Gil, Jose M., 1999. "Cointegration and causality in international agricultural economics research," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(1), January.
    10. Khurshid Kiani & Terry Kastens, 2008. "Testing Forecast Accuracy of Foreign Exchange Rates: Predictions from Feed Forward and Various Recurrent Neural Network Architectures," Computational Economics, Springer;Society for Computational Economics, vol. 32(4), pages 383-406, November.
    11. repec:wsi:apjorx:v:34:y:2017:i:05:n:s0217595917500208 is not listed on IDEAS
    12. Kastens, Terry L. & Schroeder, Ted C., 1994. "Cattle Feeder Behavior And Feeder Cattle Placements," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
    13. Zapata, Hector O. & Gil, Jose M., 1999. "Cointegration and causality in international agricultural economics research," Agricultural Economics, Blackwell, vol. 20(1), pages 1-9, January.
    14. Liang, Chyi-Lyi (Kathleen) & Feuz, Dillon M. & Taylor, R. Garth, 1998. "Spatial And Varietal Price Analysis Of Dry Edible Bean Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 1(03).
    15. Xu, Miao & Orden, David, 2002. "Exchange Rate Effects On Canadian/U.S. Agricultural Prices," 2002 Annual meeting, July 28-31, Long Beach, CA 19886, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Jana Šimáková, 2016. "Assessing the Exchange Rate Sensitivity of Bilateral Agricultural Trade in Visegrad Countries," Working Papers 0033, Silesian University, School of Business Administration.
    17. Al Awad, Mouawiya & Goodwin, Barry K., 1998. "Dynamic linkages among real interest rates in international capital markets," Journal of International Money and Finance, Elsevier, vol. 17(6), pages 881-907, December.
    18. Liu, Donald J. & Chung, Pin J. & Meyers, William H., 1993. "The Impact Of Domestic And Foreign Macroeconomic Variables On U.S. Meat Exports," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 22(2), October.

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