Exchange Rate Effects on Agricultural Prices and Trade with Special Reference to the Canadian Pork Industry PDF Download

Author: Edward Victor Zenko
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 0

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Book Description
Exchange rate fluctuations are often suggested as being a major factor in the determination of: (a) Canadian agricultural prices; and (b) trade flows of Canadian agricultural commodities. Yet, in spite of major fluctuations in the value of the Canadian dollar since the inception of a flexible exchange rate system in 1970, little work has been done to clarify the effects of such fluctuations on agricultural prices and trade. This study attempted to examine the effects of such fluctuations by meeting two objectives. The first objective was to review trade theory and exchange rate theory as they relate to agricultural commodity prices and trade flows. This portion of the study adds to the understanding of exchange rate fluctuations by developing a conceptual framework within which to consider exchange rate fluctuations. The second objective of the study was to investigate a number of econometric models with a view to determining whether a simple relationship could be demonstrated between exchange rate fluctuations, Canadian hog prices and Canada-United States trade flows in dressed pork products since the inception of a flexible exchange rate system in 1970. In meeting this objective, it was demonstrated that the effect of a fluctuation in the Canada-United States currency exchange rate was not identical to an equivalent fluctuation in the United States hog price insofar as they affected the Toronto hog price during the period January 1970 to December 1979. Rather, it was shown that a monthly fluctuation in the U.S. hog price was incorporated into the Toronto hog price more completely and in a more predictable manner than was an equivalent fluctuations in the Canada-U.S. currency exchange rate. When variations in Canadian exports, imports and net trade in dressed pork products were analyzed, statistically significant exchange rate coefficients were demonstrated. In analyzing trade flows for the period July 1976 to December 1979, exchange rate elasticities of 4.45 and 8.46 were estimated for monthly exports of dressed pork products. Exchange rate elasticities of -4.74 and -4.71 were estimated for monthly imports of dressed pork products during this 42 month period. Net trade in dressed pork products was shown to increase 0.68 million pounds for every $0.01C./$U.S. increase in the exchange rate during the same period.