Hostname: page-component-586b7cd67f-r5fsc Total loading time: 0 Render date: 2024-11-25T21:00:47.206Z Has data issue: false hasContentIssue false
  • English
  • Français

Exchange Rate Dynamics and the Bilateral Trade Balance: The Case of U.S. Agriculture

Published online by Cambridge University Press:  15 September 2016

Jungho Baek ,
Won W. Koo  and
Kranti Mulik
Jungho Baek
Affiliation:
Center for Agricultural Policy and Trade Studies in the Department of Agribusiness and Applied Economics at North Dakota State University in Fargo, North Dakota
Won W. Koo
Affiliation:
Department of Agribusiness and Applied Economics and Director of the Center for Agricultural Policy and Trade Studies, also at North Dakota State University in Fargo
Kranti Mulik
Affiliation:
Global Insight Inc. in Eddystone, Pennsylvania
Get access

Abstract

This study examines the dynamic effects of changes in exchange rates on bilateral trade of agricultural products between the United States and its 15 major trading partners. Special attention is paid to investigate whether or not the J-curve hypothesis holds for U.S. agricultural trade. For this purpose, an autoregressive distributed lag (ARDL) approach to cointegration is applied to quarterly time-series data from 1989 and 2007. Results show that the exchange rate plays a crucial role in determining the short- and long-run behavior of U.S. agricultural trade. However, we find little evidence of the J-curve phenomenon for U.S. agricultural products with the United States’ major trading partners.

Keywords

agricultural tradeautoregressive distributed lag approach to cointegrationbilateral tradeJ-curve effect
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 38 , Issue 2 , October 2009 , pp. 213 - 228
Copyright
Copyright © 2009 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ardalani, Z., and Bahmani-Oskooee, M. 2007. “Is There a J-Curve at the Industry Level?” Economics Bulletin 6(26): 1–12.Google Scholar
Bahmani-Oskooee, M. 1985. “Devaluation and the J-Curve: Some Evidence from LDCs.” Review of Economics and Statistics 67(3): 500–504.Google Scholar
Bahmani-Oskooee, M., and Ardalani, Z. 2006. “Exchange Rate Sensitivity of U.S. Trade Flows: Evidence from Industry Data.” Southern Economic Journal 72(3): 542–559.Google Scholar
Bahmani-Oskooee, M., and Bolhasani, M. 2008. “The J-Curve: Evidence from Commodity Trade between Canada and the U.S.” Journal of Economics and Finance 32(3): 207–225.Google Scholar
Bahmani-Oskooee, M., and Brooks, T.J. 1999. “Bilateral J-Curve between U.S. and Her Trading Partners.” Weltwirtschaftliches Archiv 135(1): 156–165.Google Scholar
Bahmani-Oskooee, M., and Goswami, G. 2003. “A Disaggregated Approach to Test the J-Curve Phenomenon: Japan vs. Her Major Trading Partners.” Journal of Economics and Finance 27(1): 102–113.Google Scholar
Bahmani-Oskooee, M., and Goswami, G. 2004. “Exchange Rate Sensitivity of Japan's Bilateral Trade Flows.” Japan and the World Economy 16(1): 1–15.CrossRefGoogle Scholar
Bahmani-Oskooee, M., and Ratha, A. 2004. “Dynamics of the U.S. Trade with Developing Countries.” Journal of Developing Areas 37(2): 1–11.Google Scholar
Bahmani-Oskooee, M., and Ratha, A. 2006. “The J-Curve: A Literature Review.” Applied Economics 36(13): 1377–1398.Google Scholar
Bahmani-Oskooee, M., and Wang, Y. 2007. “The J-Curve at the Industry Level: Evidence from Trade between U.S. and Australia.” Australian Economic Papers 46(4): 315–328.Google Scholar
Banerjee, A., Dolado, J.J., and Mestre, R. 1998. “Error-Correction Mechanism Tests for Cointegration in a Single-Equation Framework.” Journal of Time Series Analysis 19(3): 267–284.Google Scholar
Bessler, D.A., and Babula, R.A. 1987. “Forecasting Wheat Exports: Do Exchange Rates Matter?” Journal of Business, Economics and Statistics 5(3): 397–406.Google Scholar
Bradshaw, R., and Orden, D. 1990. “Granger Causality from the Exchange Rate to Agricultural Prices and Export Sales.” Western Journal of Agricultural Economics 15(1): 100–110.Google Scholar
Carter, C.A., and Pick, D.H. 1989. “The J-Curve Effect and the U.S. Agricultural Trade Balance.” American Journal of Agricultural Economics 71(3): 712–720.Google Scholar
Doroodian, K., Jung, C., and Boyd, R. 1999. “The J-Curve Effect and U.S. Agricultural and Industrial Trade.” Applied Economics 31(6): 687–695.Google Scholar
Engle, R.F., and Granger, C.W.J. 1987. “Cointegration and Error Correction Representation: Estimation and Testing.” Econometrica 55(2): 251–276.Google Scholar
Flemingham, B.S. 1988. “Where Is the Australian J-Curve?” Bulletin of Economic Research 40(1): 43–56.Google Scholar
Gardner, B. 1981. “On the Power of Macroeconomic Linkages to Explain Events in U.S. Agriculture.” American Journal of Agricultural Economics 63(5): 872–878.Google Scholar
Gehlhar, M., and Dohlman, E. 2007. “Global Growth, Macroeconomic Change, and U.S. Agricultural Trade.” Economic Research Report No. 46, U.S. Department of Agriculture, Washington, D.C.Google Scholar
Guptar-Kapoor, A., and Ramakrishnan, U. 1999. “Is There a J-Curve: A New Estimation for Japan.” International Economic Journal 13(4): 71–79.Google Scholar
Johansen, S. 1995. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford, UK: Oxford University Press.CrossRefGoogle Scholar
Junz, H.B., and Rhomberg, R.R. 1973. “Price Competitiveness in Export Trade among Industrial Countries.” American Economic Review 63(2): 412–418.Google Scholar
Kremers, J.J.M., Ericson, N.R., and Dolado, J.J. 1992. “The Power of Cointegration Tests.” Oxford Bulletin of Economics and Statistics 54(3): 325–348.Google Scholar
Magee, S.P. 1973. “Currency Contracts, Pass-Through, and Devaluation.” Brookings Papers of Economic Activity 4(1): 303–325.Google Scholar
Marwah, K., and Klein, L.R. 1996. “Estimation of J-Curve: United States and Canada.” Canadian Journal of Economics 29(3): 523–539.Google Scholar
Moffett, M.H. 1989. “The J-Curve Revisited: An Empirical Examination for the United States.” Journal of International Money and Finance 8(3): 425–444.Google Scholar
Orden, D. 1999. “Exchange Rate Effects on Agricultural Trade and Trade Relations.” Paper presented at the Fifth Agricultural and Food Policy Systems Information Workshop, Acapulco, Mexico, March 4-5, 1999.Google Scholar
Pesaran, M.H., and Shin, Y. 1999. “An Autoregressive Distributed Lag Modeling Approach to Cointegration Analysis.” In Strom, S., ed., Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium. Cambridge, UK: Cambridge University Press.Google Scholar
Pesaran, M.H., Shin, Y., and Smith, R.J. 2001. “Bounds Testing Approaches to the Analysis of Level Relationships.” Journal of Applied Econometrics 16(3): 289–326.Google Scholar
Rose, A.K. 1991. “The Role of Exchange Rate in a Popular Model of International Trade: Does the Marshall-Lerner Condition Hold?” Journal of International Economics 30(3/4): 301–316.Google Scholar
Rose, A.K., and Yellen, J.L. 1989. “Is There a J-Curve?” Journal of Monetary Economics 24(1): 53–68.Google Scholar
Wooldridge, J.M. 2000. Introductory Econometrics: A Modern Approach. Mason, OH: South-Western College Publishing.Google Scholar