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Does the equilibrium real exchange rate improve cocoa export performance?

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  • Ridwan Mukaila

    (University of Nigeria)

Abstract

The exchange rate is a major driver of agricultural trade globally, and any change in it may influence exports. While several studies have shown the impact of exchange rate fluctuation on agricultural exports, the impact of maintaining the exchange rate at equilibrium on agricultural exports, especially cocoa, receives less attention. Based on this, this study examined whether maintaining the exchange rate at the equilibrium value, that is, the equilibrium real exchange rate, will improve cocoa exports. This study further examined the effects of exchange rate misalignment and some economic fundamentals on cocoa exports. Granger causality, autoregressive distributed lag model, and error correction model were used to analyse the data covering 1970 to 2021. This study found that the equilibrium real exchange rate positively influenced cocoa exports. However, exchange rate misalignments lower the volume and worsen the performance of cocoa exports. Thus, maintaining the exchange rate at equilibrium increased cocoa export volume, which, in turn, enhanced its performance. Furthermore, increases in trade openness, capital inflows, and terms of trade enhanced cocoa exports. These call for monitoring the exchange rate at equilibrium values and improving terms of trade and trade openness to enhance cocoa exports.

Suggested Citation

  • Ridwan Mukaila, 2023. "Does the equilibrium real exchange rate improve cocoa export performance?," SN Business & Economics, Springer, vol. 3(11), pages 1-21, November.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:11:d:10.1007_s43546-023-00574-6
    DOI: 10.1007/s43546-023-00574-6
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    More about this item

    Keywords

    Cocoa export; Equilibrium real exchange rate; Exchange rate misalignment; Trade openness; Term of trade;
    All these keywords.

    JEL classification:

    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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