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The impacts of exchange rate volatility on vegetable trade flows

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Trade flows of commodities are generally affected by the principles of comparative advantage in a free trade. However, trade flows might be enhanced or distorted not only by various government interventions, but also by exchange rate fluctuations among others. This study applies a commodity-specific gravity model to selected vegetable trade flows among Organization for Economic Co-operation and Development (OECD) countries to determine the effects of exchange rate uncertainty on the trade flows. Using the data from 1996 to 2002, the results show that, while the exchange rate uncertainty significantly reduces trade in the majority of commodity flows, there is evidence that both short- and long-term volatility have positive effect on trade flows of specific commodities. This study also tests the regional preferential trade agreements such as the North American Free Trade Agreement (NAFTA), the Asia-Pacific Economic Cooperation (APEC) and the EU, and their different effects on commodities.
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Document Type: Research Article

Affiliations: 1: Department of Accounting, Agribusiness & Economics, South Carolina State University, 300 College Street, Orangeburg, SC, USA 2: Department of Business Administration, Yokohama National University, 79-4, Tokiwadai, Hodogaya-ku, Yokohama, 240 0067, Japan 3: Department of Finance, Duke University, Durham, NC, USA 4: Department of Business Administration, South Carolina State University, Orangeburg, SC, USA

Publication date: 2011-05-01

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