Does agricultural trade respond asymmetrically to oil price shocks? Evidence from New Zealand

Do rising oil prices affect agricultural trade differently from falling oil prices? We answer this question using data on New Zealand, a net importer of oil and a net exporter of agricultural commodities. We consider a disaggregated approach, analysing exports and imports of five key commodity classes; nonlinear autoregressive lag models are employed to conduct the analysis. We find considerable evidence suggesting asymmetries in the effects of oil price shocks on agricultural trade in the long and the short run. Furthermore, in the long run, agricultural exports and imports appear to be largely insensitive to foreign and domestic real income, respectively; there is limited evidence for imports and exports being associated with the real effective exchange rate. In the short run, however, income and exchange rates are associated with imports and exports.