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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 Perée 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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    References listed on IDEAS

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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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    Cited by:

    1. 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.
    2. 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.
    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), University of Nice Sophia Antipolis.
    4. 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).
    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. Seccia, Antonio & Santeramo, Fabio Gaetano & Nardone, Gianluca, 2015. "Trade competitiveness in table grapes: a global view," MPRA Paper 70931, University Library of Munich, Germany.

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