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The role of price risk in China’s agricultural and fisheries exports to the US

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  • Dengjun Zhang
  • Yuqing Zheng

Abstract

This article explores the effect of price risk on the US importers’ optimal allocation of agriculture imports between the major supplier, China, and other competing countries. We first modify a demand system to account for the impacts of own-price risk and cross-price risk, and then apply the model to 16 agricultural and fisheries commodities exported to the US. The estimation results show that importers are sensitive to price risks of 14 Chinese commodities. Comparisons between price risk–trade relations of agricultural and fisheries products and between trade effects of cross-price risk on Chinese goods and substitutes provide strong evidence for explaining the observed trade patterns. Our study highlights the importance of price stability in promoting international trade, especially from developing countries to developed countries.

Suggested Citation

  • Dengjun Zhang & Yuqing Zheng, 2016. "The role of price risk in China’s agricultural and fisheries exports to the US," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3944-3960, September.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:41:p:3944-3960
    DOI: 10.1080/00036846.2016.1148259
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    References listed on IDEAS

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    1. Kafle, Kashi R. & Kennedy, P. Lynn, 2012. "Exchange Rate Volatility and Bilateral Agricultural Trade Flows: The Case of the United States and OECD Countries," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119736, Southern Agricultural Economics Association.
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