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Flexible Exchange Rates and Commodity Price Changes: The Case of Japan

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  • Cathy L. Jabara
  • Nancy E. Schwartz

Abstract

Although agricultural commodities are often assumed to have flexible prices, little has been done to estimate exchange rate pass-through. Perfect commodity arbitrage opportunities imply complete pass-through; imperfect opportunities could lead to incomplete pass-through. Analysis of commodity price and exchange rate adjustments for five commodities exported to Japan by the United States reveals that during the 1970s, commodity prices were generally flexible. During the 1980s, when the dollar was rising, price stickiness on the part of exporters/importers contributed to inflexible prices and asymmetric exchange rate response. Specifically, an exchange rate increase was passed through for some commodities but not a decline.

Suggested Citation

  • Cathy L. Jabara & Nancy E. Schwartz, 1987. "Flexible Exchange Rates and Commodity Price Changes: The Case of Japan," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 580-590.
    • Handle: RePEc:oup:ajagec:v:69:y:1987:i:3:p:580-590.
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    File URL: http://hdl.handle.net/10.2307/1241693
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    Citations

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    Cited by:

    1. Seale, James L., Jr. & Moss, Charles B., 1989. "The Overshooting Hypothesis: Are Agricultural Exports More Sensitive?," 1989 Annual Meeting, July 30-August 2, Baton Rouge, Louisiana 270704, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Fuller, Frank Harland, 1996. "The location of marginal production for value-added and intermediate goods: optimal policies and trade volumes," ISU General Staff Papers 1996010108000012147, Iowa State University, Department of Economics.
    3. Robyn Swift, 2004. "The pass‐through of exchange rate changes to the prices of Australian exports of dairy and livestock products," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), pages 159-185, March.
    4. Swift, Robyn, 2004. "The pass-through of exchange rate changes to the prices of Australian exports of dairy and livestock products," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), pages 1-27.
    5. Goodwin, Barry K. & Holt, Matthew T. & Prestemon, Jeffrey P., 2019. "Nonlinear exchange rate pass-through in timber products: The case of oriented strand board in Canada and the United States," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    6. Lin, Biing-Hwan & Mori, Hiroshi & Jones, James R. & Gorman, William D., 1988. "Effects Of Trade Liberalization On Market Shares And Imports In The Japanese Beef Market," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270411, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Kenneth W. Clements & Jiawei Si & Hai Long Vo, 2023. "The Law of One Food Price," Open Economies Review, Springer, vol. 34(1), pages 195-216, February.
    8. Walter C. Labys & Alfred Maizels, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Paper Series wp-1990-088, World Institute for Development Economic Research (UNU-WIDER).
    9. Liu, Zong-Shin, 1989. "Monetary policy, exchange rate, and effects on US wheat trade and domestic market in an imperfect competition framework," ISU General Staff Papers 1989010108000010216, Iowa State University, Department of Economics.
    10. Khalid Mushtaq & Abdul Ghafoor & Abedullah & Farhan Ahmad, 2011. "Impact of Monetary and Macroeconomic Factors on Wheat Prices in Pakistan: Implications for Food Security," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(1), pages 95-110, Jan-Jun.
    11. Barry K. Goodwin & Ted C. Schroeder, 1991. "Price Dynamics in International Wheat Markets," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 39(2), pages 237-254, July.
    12. Webber, Anthony G, 1997. "Australian Commodity Export Pass-through and Feedback Causality from Commodity Prices to the Exchange Rate," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 55-68, June.
    13. Almarwani, Abdul & Jolly, Curtis M. & Thompson, Henry, 2007. "Exchange Rates and Commodity Markets: Global Exports of Corn, Cotton, Poultry, and Soybeans," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 8(1), pages 1-10, January.

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