Measurement of Effective Exchange Rates Appropriate for Agricultural Trade

John Dutton and Thomas Grennes

No 259748, Department of Economics and Business - Archive from North Carolina State University, Department of Economics

Abstract: The paper is concerned with the effect of an exchange rate variation on agricultural trade. Most related literature has dealt with specification of economic models and empirical estimation of model parameters. In contrast, this paper concentrates on the appropriate measurement of multilateral exchange rate changes for the analysis of agricultural trade. Literature on the economic theory of index numbers was reviewed for guidance in constructing effective exchange rate indices. Major existing exchange rate indices were compared including those of the Federal Reserve Board, International Monetary Fund, Morgan Guaranty Trust, and the U.S. Department of Agriculture. New indices were constructed based on" alternative weighting schemes and index forms. In general, measurement differences among indices were not negligible and for certain periods, discrepancies were substantial. Of all the indices considered, the USDA's real trade-weighted dollar showed less appreciation of the dollar since 1980 than any of the other indices based on total trade or. agricultural trade. This raises the question of whether the USDA index understates the importance of exchange rates when large changes occur. The significance of the results is illustrated in terms of an agricultural trade model. It appears that proper measurement of the exchange rate variable may be as important as accurate measurement of parameters of the model.

Keywords: Agribusiness; International Relations/Trade (search for similar items in EconPapers)
Pages: 76
Date: 1985-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://ageconsearch.umn.edu/record/259748/files/magr-northcarolinastate-165.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:ncbuar:259748

DOI: 10.22004/ag.econ.259748

Access Statistics for this paper

More papers in Department of Economics and Business - Archive from North Carolina State University, Department of Economics
Bibliographic data for series maintained by AgEcon Search ().