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Exchange rate uncertainty and US bilateral fresh fruit and fresh vegetable trade: an application of the gravity model

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  • I. Sheldon
  • S. Khadka Mishra
  • D. Pick
  • S. R. Thompson

Abstract

In order to analyse the effect of exchange rate uncertainty, we apply an empirical gravity equation to two sets of US bilateral trade data: fresh fruit over the period 1976--1999 for a panel of 26 countries; and fresh vegetables over the period 1976--2006 for a panel of nine countries. Based on panel estimation methods, and using both a moving SD measure and the Per饠and Steinherr (1989) measure of exchange rate uncertainty, the results show that US bilateral fresh fruit trade has been negatively affected by exchange rate uncertainty. We also find some evidence that the exchange rate between the US dollar and the currencies of Latin American trading partners accounts for most of the negative impact of exchange rate uncertainty on bilateral trade flows in fresh fruit. In contrast, when using panel estimation methods and both measures of exchange rate uncertainty, we find no statistically significant evidence for any negative effect of exchange rate uncertainty on US bilateral fresh vegetable trade. However, we do find a statistically significant negative effect for exchange rate uncertainty when we estimate a US export gravity equation for fresh vegetables using the same panel of countries.

Suggested Citation

  • I. Sheldon & S. Khadka Mishra & D. Pick & S. R. Thompson, 2013. "Exchange rate uncertainty and US bilateral fresh fruit and fresh vegetable trade: an application of the gravity model," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2067-2082, May.
    • Handle: RePEc:taf:applec:45:y:2013:i:15:p:2067-2082
    DOI: 10.1080/00036846.2011.650330
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    1. Baldwin, Richard E. & Skudelny, Frauke & Taglioni, Daria, 2005. "Trade effects of the euro: evidence from sectoral data," Working Paper Series 446, European Central Bank.
    2. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May.
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    2. Kenichi Kashiwagi & Erraach Yamna & Lamia Arfa & Lokman Zaibet, 2020. "Growing Olive Oil Export and Intra-Industry Trade in Mediterranean Countries: Application of Gravity Model," Sustainability, MDPI, vol. 12(17), pages 1-16, August.
    3. Raphaël Chiappini & Yves Jégourel, 2014. "Futures Market Volatility, Exchange Rate Uncertainty and Cereals Exports: Empirical Evidence from France," GREDEG Working Papers 2014-34, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Deepika Krishnan & Vishal Dagar, 2022. "Exchange Rate and Stock Markets During Trade Conflicts in the USA, China, and India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(2), pages 185-203, May.
    5. De Matteis, Maria & Yu, Edward & Boyer, Christopher & Lewis, Karen, 2017. "Determinants of the Export Demand of U.S. Distillers Dried Grains with Solubles," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252668, Southern Agricultural Economics Association.
    6. Svetlana Fedoseeva, 2016. "Same currency, different strategies? The (asymmetric) role of the exchange rate in shaping European agri-food exports," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 1005-1017, March.
    7. Rallatou, Dionysia & Tzouvelekas, Vangelis, 2016. "An Analysis of the Trade Patterns of Olive-Oil in the European Union," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 17(2), June.
    8. Ian M. Sheldon, 2021. "Reflections on a Career as an Industrial Organization and International Economist," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 468-499, June.
    9. Poomthan Rangkakulnuwat & Rungravee Weravess, 2022. "The gravity model for rice exports: The cases of India and Thailand," Economics Bulletin, AccessEcon, vol. 42(3), pages 1432-1473.
    10. Bilal KARGI, 2014. "Time Series Analysis about the Relationship between Foreign Trade and Exchange Rate in Turkish Economy," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 7(2), pages 123-133, December.
    11. Eichler, Stefan & Littke, Helge C.N. & Tonzer, Lena, 2017. "Central bank transparency and cross-border banking," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 1-30.
    12. Braha, K. & Qineti, A. & Cupák, A. & Lazorčáková, E., 2017. "Determinants of Albanian Agricultural Export: The Gravity Model Approach," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 9(2), June.
    13. Fedoseeva, Svetlana, 2014. "Are Agri-food Exports any Special? Exchange Rate Nonlinearities in European Exports to the US," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(4).
    14. Trust R. Mpofu, 2021. "The determinants of real exchange rate volatility in South Africa," The World Economy, Wiley Blackwell, vol. 44(5), pages 1380-1401, May.
    15. Jin, Y. & Jin, S., 2018. "The Heterogeneous Impact of Exchange Rate Volatility on Agricultural Export: Evidence from Chinese Food Firm-level Data," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277197, International Association of Agricultural Economists.
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