Exchange Rate Regimes and Agricultural Trade Tola Oyeyemi Emma Phillips Gary Xia NOTE: Will add tractor blockade picture to each slide later…

Think about this… Images: http://www.dw.de/nuclear-waste-shipment-continues-to-spark-determined-protests/a-6201316 http://www.marxist.com/greek-december-short-balance-sheet.htm http://www.apostropher.com/blog/archives/001542.html

What is the effect of agricultural trade on exchange rate regimes? Question What is the effect of agricultural trade on exchange rate regimes?

Background on Independent Variable Decline Still a Loud Voice Globalization, Industrialization <1960 = 30% of all merch trade By 2000, <9% Dwight Watson Thousands in damages 10 block area shut down in DC Federal offices evacuated In 2012 alone: Serbia, India, Paraguay 47 hours in pond in national mall, claimed to have explosives, 2003 Anderson, 2010, p. 3009 Leonnig, 2003 United Press Int’l, 2012; Prensa Latina, 2012; The Times of India, 2012) Image: http://www.apostropher.com/blog/archives/001542.html .

Background on Dependent Variable Exchange rate regimes: Float, fix, peg The Gold Standard Bretton-Woods Float Mundell-Fleming Trilemma: Free flow $, exΔ rate certainty, policy-making autonomy “Flexibility vs. credibility”(Singer, 2010) Elwell, 2011; Singer, 2010 Image: http://www.voxeu.org/article/empirical-evidence-monetary-policy-trilemma-1970

Hypotheses Hypotheses Hypotheses Hypotheses Hypotheses Hypotheses If a country has large… They would move towards a… Share of GDP in the agricultural sector Share of GDP in agricultural exporting Share of GDP in Domestic Agriculture Pegged Rate Floating Rate

Methods Data Sets: Singer & WDI 1980 to 2008 Independent Variable  Agricultural Economy Agriculture’s %GDP per capita Exports in Agriculture (% of GDP) Domestic Agriculture (% of GDP) Dependent Variable  Exchange Rate Regimes IMF scale: 1 = fully fixed, 4 = fully floating

More Variables Test for Robustness Control Variables  Lagged Dependent Variable -Remittances -Exports -Reserves -Democracy -Inflation -Manufacturing -A few more…

Results Table 5.1: Relationship Between Agricultural Sector and Exchange Rate Regime, 1980-2009   Model 1 Model 2 Model 3 Model 4 Model 5 Agriculture, value added (% of GDP) -0.001 (0.002) Agricultural raw materials exports, (% of GDP) -0.073*** -0.017*** -0.013** -0.010** (0.012) (0.006) (0.005) Domestic Agriculture, value added (% of GDP) .007*** 0.003 0.001 0.000 (0.003) (0.001) Lagged dependent variable 0.856*** 0.874*** 0.875*** (0.017) (0.013) 0.012 Remittances/GDP (lagged) -0.008* -0.004 (0.004) Exports/GDP (lagged) -0.002** -0.003*** Reserves (in months of imports) -0.012* -0.010* -0.007 (0.007) Democracy (polity score) 0.007** 0.006** Current account balance 0.007* Inflation (lagged) (0.000) Manufacturing/GDP Percent fix (de jure only) -0.003 Year -0.002 Capital account openness (KAOPEN) (0.014) Terms of trade volatility Constant 2.191*** 2.306*** 4.314 0.463*** 0.426*** (0.040) (0.047) (5.900) (0.064) (0.056) Obs. 2676 1910 945 1314 1525 Note: Regression coefficients; standard errors in parentheses. * p<0.1, ** p<0.05, *** p<0.01

Conclusions Agriculture (%GDP) insignificant Exports consistently negative and significant Last hypothesis unsupported Remittances insignificant when agriculture is accounted for 2nd Bullet: I guess we would discuss exports in this bullet…..

Analysis Share of GDP in the agricultural sector Pegged Rate If a country has large… They would move towards a… Share of GDP in the agricultural sector Share of GDP in agricultural exporting Share of GDP in Domestic Agriculture Pegged Rate Floating Rate

Why are these results important? Exchange rates are highly manipulated What influences exchange rates? Many variables to consider Well-being of people

Continuing our Work Introduction to larger macroeconomic issues Looking at international trade as a whole More accurate and comprehensive data Imports, more countries, etc. Bullet 1: how government makes economic policy decisions. Bullet 2: Considering other sources of capital flow

Thank You! Questions? Comments? Concerns?