Abstract
AbstractAsian countries consume approximately 90% of the world’s rice supply. Between 2007 and 2014, Thailand, Vietnam, and India accounted for 60% of the world’s exports of rice. A nonlinear autoregressive distributed lag (NARDL) econometric model is utilized to estimate the impact of exchange rate fluctuations on rice trade in Southeast Asia. Focusing on the largest importing countries and exporting country by volume, the analysis considers Malaysian, Indonesian, the Philippines, and Chinese rice imports from Thailand. Results show that importing countries’ state trading enterprises (STEs) generally do not follow profit-maximizing behavior in reacting to exchange rate volatility.
Highlights
Rice is an important staple crop for almost half of the world’s population (Hoang and Meyers, 2015), and is important for Asian countries where 90% of rice is grown and consumed (Kim and Andres Ramirez, 2014; Ricepedia, 2020)
China has stressed to the World Trade Organization (WTO) that their state trading enterprises (STEs) operates competitively, highlighting that rice imports are determined by domestic supply, domestic and world prices of rice, and “other factors” (WTO, 2018a)
The results are inconsistent with theoretical expectations when depreciation (ER−) occurs—a 1% decrease in the exchange rate leads to a 1.92% and 1.97% increase in value of imports, both significant
Summary
Rice is an important staple crop for almost half of the world’s population (Hoang and Meyers, 2015), and is important for Asian countries where 90% of rice is grown and consumed (Kim and Andres Ramirez, 2014; Ricepedia, 2020). Chen and Saghaian (2016) analyze the world rice export markets using a threshold vector error correction model; their results reveal that rice export prices for the United States of America, Thailand, and Vietnam are cointegrated, with the first two countries being the price leaders. This paper relates to the asymmetrical exchange-rate pass-through work of Luckstead (2018) and Anders and Fedoseeva (2017), who use a NARDL model to study cocoa and coffee markets, respectively Their results show that when appreciation and depreciation are explicitly separated, substantial nonlinearities exist in how importers of these commodities respond to exchange rate volatility. Because the Southeast Asian importing countries included in this study manage rice imports through STEs, this analysis will provide insight as to whether these agencies respond to exchange rate fluctuations in a manner consistent with profit-maximizing firms— appreciation (depreciation) of an importers’ currency results in imports rising (falling). Our analysis includes Malaysian, Indonesian, the Philippines, and Chinese rice imports from Thailand
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