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Exchange Rate Effects On Canadian/U.S. Agricultural Prices

  • Xu, Miao
  • Orden, David

Exchange rate effects on prices in Canada and the United States are evaluated for five traded farm outputs (wheat, soybeans, corn, feeder steers, and slaughter steers) and four traded non-farm-produced inputs (fertilizer, pesticides, petroleum, and farm machinery). Unit root tests suggest the series are stationary in first differences. Short-run dynamic models based on the differences specification adopted earlier by Carter, Grey and Furtan (1990) are re-estimated using similar data over an extended period that encompasses recent exchange rate movements. The analysis confirms that short-run adjustments toward the law of one price occur for the five agricultural outputs and to a lesser extent for the three intermediate inputs, while such price adjustment is refuted for farm machinery. Cointegration tests also show price convergence to stationary long-run equilibrium relationships for the five farm outputs but not for the inputs.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2002 Annual meeting, July 28-31, Long Beach, CA with number 19886.

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Date of creation: 2002
Date of revision:
Handle: RePEc:ags:aaea02:19886
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  1. Samarendu Mohanty & E. Wesley F. Peterson & Damell B. Smith, 1996. "Relationships between U.S. and Canadian Wheat Prices: Cointegration and Error Correction Approach," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 44(3), pages 265-276, November.
  2. 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.
  3. Colin A. Carter & Neil A. Hamilton, 1989. "Wheat inputs and the law of one price," Agribusiness, John Wiley & Sons, Ltd., vol. 5(5), pages 489-496.
  4. Schroeder, Ted C. & Goodwin, Barry K., 1990. "Price Dynamics in International Wheat Markets," Staff Papers 118178, Kansas State University, Department of Agricultural Economics.
  5. Froot, Kenneth A. & Kim, Michael & Rogoff, Kenneth, 1995. "The Law of One Price Over 700 Years," Working Papers 95-13, C.V. Starr Center for Applied Economics, New York University.
  6. Maloney, William F, 1999. "Exchange Rate Uncertainty and the Law of One Price," Review of International Economics, Wiley Blackwell, vol. 7(2), pages 328-41, May.
  7. MacKinnon, James G, 1994. "Approximate Asymptotic Distribution Functions for Unit-Root and Cointegration Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 167-76, April.
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