Exchange Rate Regimes and Agricultural Trade Tola Oyeyemi Emma Phillips Gary Xia

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

Background on Independent Variable Decline Globalization, Industrialization <1960 = 30% of all merch trade By 2000, <9% Still a Loud Voice Dwight Watson –Thousands in damages –10 block area shut down in DC –Federal offices evacuated In 2012 alone: –Serbia, India, Paraguay Anderson, 2010, p Leonnig, 2003 United Press Int’l, 2012; Prensa Latina, 2012; The Times of India, 2012) Image:

Background on Dependent Variable Elwell, 2011; Singer, 2010 Image: evidence-monetary-policy-trilemma-1970http:// evidence-monetary-policy-trilemma-1970 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)

Hypotheses Pegged Rate Floating Rate They would move towards a… Hypotheses 1.Share of GDP in the agricultural sector 1.Share of GDP in agricultural exporting 1.Share of GDP in Domestic Agriculture Hypotheses If a country has large…

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, Model 1Model 2Model 3Model 4Model 5 Agriculture, value added (% of GDP) (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*** (0.002)(0.003)(0.002)(0.001) Lagged dependent variable0.856***0.874***0.875*** (0.017)(0.013)0.012 Remittances/GDP (lagged)-0.008* (0.004)(0.003) Exports/GDP (lagged)-0.002**-0.003*** (0.001) Reserves (in months of imports)-0.012*-0.010* (0.007)(0.006)(0.005) Democracy (polity score)0.007**0.006** 0.003(0.003)(0.002) Current account balance0.007*0.003 (0.004)(0.003) Inflation (lagged)0.000 (0.000) Manufacturing/GDP0.001 (0.003) Percent fix (de jure only) (0.002) Year (0.003) Capital account openness (KAOPEN) (0.014) Terms of trade volatility (0.003) Constant2.191***2.306*** ***0.426*** (0.040)(0.047)(5.900)(0.064)(0.056) Obs Note: Regression coefficients; standard errors in parentheses. * p<0.1, ** p<0.05, *** p<0.01

Conclusions 1.Agriculture (%GDP) insignificant 1.Exports consistently negative and significant 1. Last hypothesis unsupported 1. Remittances insignificant when agriculture is accounted for

Pegged Rate Floating Rate 1.Share of GDP in the agricultural sector 1.Share of GDP in agricultural exporting 1.Share of GDP in Domestic Agriculture Analysis They would move towards a…If a country has large…

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.

Thank You! Questions?Comments?Concerns?