EXCHANGE RATE EFFECTS ON CANADIAN/U.S. AGRICULTURAL PRICES

Miao Xu and David Orden

No 19886, 2002 Annual meeting, July 28-31, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Exchange rate effects on prices in Canada and the United States are evaluated for five traded farm outputs (wheat, soybeans, corn, feeder steers, and slaughter steers) and four traded non-farm-produced inputs (fertilizer, pesticides, petroleum, and farm machinery). Unit root tests suggest the series are stationary in first differences. Short-run dynamic models based on the differences specification adopted earlier by Carter, Grey and Furtan (1990) are re-estimated using similar data over an extended period that encompasses recent exchange rate movements. The analysis confirms that short-run adjustments toward the law of one price occur for the five agricultural outputs and to a lesser extent for the three intermediate inputs, while such price adjustment is refuted for farm machinery. Cointegration tests also show price convergence to stationary long-run equilibrium relationships for the five farm outputs but not for the inputs.

Keywords: Demand and Price Analysis; International Relations/Trade (search for similar items in EconPapers)
Date: 2002
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