Abstract

Granger causality tests were used to examine the relationship between U.S. agricultural commodity exports to designated regions and commodity-specific trade-weighted regional inflation adjusted exchange rates for the years 1968-84. Commodities examined were corn, wheat, soybeans, and rice. Importing regions were: Japan, Middle Income Asia, Western Europe, Latin America, and Canada. Various lag structures were employed yielding different results. A strong relation running from exchange rate to exports was found for soybeans, while corn exports were found to be insensitive to exchange rate movements. The sensitivity of rice and wheat exports varied among regions. Exports to Western Europe and Middle Income Asia exhibited the strongest causal relationship with exchange rates, while exports to Latin America exhibited the weakest. Lagging exchange rates two and three periods yielded a far stronger relationship with exports than a one period lag. For policy purposes, this indicates commodity exports respond to exchange rate changes with a two or three year lag.

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