The Effect of Exchange Rate Volatility on Agricultural Export

Authors

• H. Asgharpur
• S. Mohammadpoor
• A. Rezazadeh
• Kh. Jahangiri

Abstract

The main objective of this paper is to investigate the effect of real exchange rate volatility on export of agricultural sector in Iran over the period 1974-2007. For this purpose, first, the exchange rate volatility index has been estimated using EGARCH(0,1) and then, in an econometrics models, the effect of exchange rate volatility index on export of agricultural sector has been tested.The results of Saikkonen and Lutkepohl co-integration test show that there is at least one co-integration vector between variables of the model. The results of co-integration vector estimation using the FMOLS approach indicate that exchange rate volatility has a significant negative effect on export of agricultural sector. Also, the empirical results show that, in the long- run, the world GDP and Iran’s GDP variables have a significant positive and the export price index has a negative effect on agricultural export. According to this empirical result, to increase the agricultural export in the Iranian economy, the policy makers must be decrease the exchange rate volatility.
 

Keywords

• Agricultural Export
• Exchange Rate Volatility
• Saikkonen and Lutkepohl Co-integration Approach
• FMOLS

20.1001.1.20086407.1391.4.13.7.7

---

References

1. Acaravci, A., Öztürk, I., (2003), The Effects of Exchange Rate

Volatility on the Turkish Export: An Empirical Investigation,

Review of Social, Economic & Business Studies, No.2, PP.197-

206.

2. Brada, J. C. and J. A. Méndez (1988), ‘Exchange Rate Risk,

Exchange Rate Regime and the Volume of International Trade’,

Kyklos, vol. 41,No. 2, pp. 263-80.

3. Broll, U. and B. Eckwert (1999), Exchange Rate Volatility and

International Trade, Western Economic Journal, vol. 11, No. 3,

pp. 302-13.

4. Brooks, C. (2008), Introductory econometrics for finance,

Cambridge University Press, Second Edition.

5. Choudhry, T., (2005), Exchange rate volatility and the United

States exports: evidence from Canada and Japan, J. Japanese Int.

Economies, No.19, PP.51-71.

6. Clark, P. (1973), ‘Uncertainty, Exchange Risk, and the Level of

International Trade’, Western Economic Journal, vol. 11, No. 3,

pp. 302-13.

7. Central Bank of Iran, Economic Time Series Data Set

(www.tsd.cbi.ir)

8. De Grauwe, P. (1988), ‘Exchange Rate Variability and the

Slowdown in Growth of International Trade’, IMF Staff Papers,

vol. 35, No. 1, pp.63-84.

9. De Grauwe, P. (1994), The Economics of Monetary Integration

(New York: OxfordUniversity Press).

10. Dehmardeh, N., M. Safdari and M. Shahiki Tash. (2010), The

Effect of Macroeconomic Index on Income Distribution in Iran,

Journal of Trade Studies Vol.54, pp.25-55.

11. Ehsani, M.A., A. KhanAlipoor and Abbasi. J. (2009), The Effect

of Exchange Rate Volatility on Iran non-oil Export, Economics

Research, Vol.32, pp.13-34.

12. Esmaeili, A.K. (2009), The Effect of Export premium on

Agricultural Export, Journal of Agricultural Economics Research,

Vol.1, no.4, pp.93-106.

13. Fogarasi, j., (2010), The Effect of Exchange Rate Volatility upon

Foreign Trade of Romanian Agricultural Products, Global 

Development Network Regional Research Competition, Project

RRC8+39.

14. Franke, G. (1991), ‘Exchange Rate Volatility and International

Trading Strategy’,Journal of International Money and Finance,

vol. 10, No. 2, pp. 292-307.

15. Hall, S., Hondroyiannis, G., Swamy, P, A, V, B., Tavlas, G.,

Ulan., M., (2010), Exchange-rate volatility and export

performance: Do emerging market economies resemble industrial

countries or other developing countries?, Economic Modelling,

No.27, PP.1514–1521.

16. Hojabr Kiani, K., and S. Nik eghbali. (2000), The Effect of

Exchange Rate inequilibrium on Agricultural Export, Journal of

Economic Research, Vol.56, pp.39-53.

17. Hooper, P. and S.W. Kohlhagen (1978), ‘The Effect of Exchange

Rate Uncertainty on International Trade: A Reexamination of the

Theory’, Southern Economic Journal, vol. 59, No. 4, pp.641-47.

18. Karami, A., and M. Zibaei. (2008), The Effect of Exchange Rate

Volatility on Agricultural Export, Journal of Economic Research,

Vol.8, no.3, pp.59-71.

19. Samadi, A.H., and M. PPahlavani. (2009), Cointegration and

Structural Break in Economy, Sistan va Balouchestan University

Press.

20. Sercu, P. and C. Vanhulle (1992), ‘Exchange Rate Volatility,

International Trade, and Some Empirical Evidence’, IMF

Occasional Paper No. 220.

21. http://www.fao.org/