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Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan

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  • Jacinto F. Fabiosa

Abstract

A model of a representative Canadian pork exporter is developed to examine the impacts of the exchange rate and its volatility on pork and live swine exports. The pork export supply equation is expressed as a function of the expected level of real exchange rate and a time-varying variance of real exchange rate. An AR(p) model is used to represent the expected real exchange rate, and a GARCH(p, q) model is used to generate the time-varying variance. The same model is used to examine the sensitivity of pork exports to Japan from Canada, the United States, and Denmark. The parameters of all pork and live swine export equations have theoretically consistent signs and many are significant. That is, the domestic price in the exporting country has a negative effect on exports because it is a major input price in the exporter's cost function while the price in the market of destination has a positive effect. The level of the exchange rate has a positive impact on pork exports while the volatility of the exchange rate has a negative impact. Most of the volatility parameters are not significant.

Suggested Citation

  • Jacinto F. Fabiosa, 2002. "Assessing the Impact of the Exchange Rate and Its Volatility on Canadian Pork and Live Swine Exports to the United States and Japan," Food and Agricultural Policy Research Institute (FAPRI) Publications (archive only) 02-wp305, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:fpaper:02-wp305
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    References listed on IDEAS

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    1. Zhao, Zishun & Klein, Nicole L. & Santos, Joseph M., 2001. "The Effects Of Exchange Rate Fluctuations On Live Hog Trade Between The U.S. And Canada," 2001 Annual meeting, August 5-8, Chicago, IL 20474, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Holt, Matthew & Aradhyula, Satheesh V., 1990. "Price Risk in Supply Equations: An Application of Garch Time-Series Models to the U.S. Broiler Market," Staff General Research Papers Archive 276, Iowa State University, Department of Economics.
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    Cited by:

    1. Longjiang Chen, 2011. "The effect of China's RMB exchange rate movement on its agricultural export: A case study of export to Japan," China Agricultural Economic Review, Emerald Group Publishing, vol. 3(1), pages 26-41, January.
    2. Zhang, Qiang & Reed, Michael R., 2006. "The Impact of Multiple Volatilities on Import Demand for U.S. Grain: The Case of Soybeans," 2006 Annual meeting, July 23-26, Long Beach, CA 21079, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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