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Exchange Rate Volatility and Bilateral Agricultural Trade Flows: The Case of the United States and OECD Countries

Author

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  • Kafle, Kashi R.
  • Kennedy, P. Lynn

Abstract

This study documents the effect of exchange rate volatility and the real exchange rate on bilateral agricultural exports, imports and total trade (exports + imports) flows between the United States and OECD countries. The effect of exchange rate volatility is estimated both separately from and in combination with the real exchange rate. In addition, implementation of Free Trade Agreements (FTAs) and use of the Euro as a national currency (Euro) are included as dummy variables and their effects on trade flows are also determined. A panel data set, which contains 28 cross-sections and 1148 observations, is used for bilateral trade flows between the United States and OECD countries from 1970 to 2010. With an empirical model based on a gravity equation, the results show that exchange rate volatility and the real exchange rate have a statistically significant and negative effect on agricultural, non-agricultural and total exports, imports, and trade (exports +imports) flows. Exchange rate volatility is found to have a greater impact on the agricultural sector, while the real exchange rate has a greater impact on the non-agricultural sector. Effects of FTAs and the Euro are always positive, with FTAs having a greater impact on the agricultural sector and the Euro on the non-agricultural sector.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:saea12:119736
    DOI: 10.22004/ag.econ.119736
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    2. Geraldo Moreira Bittencourt & Antônio Carvalho Campo, 2014. "Efeitos Da Instabilidade Da Taxa De Câmbio No Comércio Setorial Entre Brasil E Seus Principais Parceiros Comerciais," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 105, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. 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.
    4. 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.
    5. Maria C. De Matteis & T. Edward Yu & Christopher N. Boyer & Karen L. DeLong, 2019. "Analyzing determinants of US distillers dried grains with solubles exports," Agribusiness, John Wiley & Sons, Ltd., vol. 35(2), pages 168-181, April.
    6. Bittencourt, Geraldo & Campos, Antonio, 2015. "Impacts of Exchange Rate Instability upon the Brazilian Agribusiness," 2015 Conference, August 9-14, 2015, Milan, Italy 211356, International Association of Agricultural Economists.
    7. Alegwu, Friday O. & Aye, Goodness C. & Asogwa, Benjamin C., 2017. "Asymmetric Effect of Real Exchange Rate Volatility on Agricultural Products Export: A Case Study," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(3), pages 261-279.
    8. 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.

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