Exchange Rate Volatility and US Import Demand for Salmon

作者:Zhang, Dengjun; Kinnucan, Henry W. 刊名:Marine Resource Economics 上传者:林玉泉

【摘要】In this article, a risk-augmented differential demand system is developed to test the effects of exchange rate volatility (ERV) on trade. Applying the model to data on US imports of salmon from Chile, Canada, Norway, the United Kingdom, and Rest of World (ROW), results indicate ERV reduces imports. The effect, however, is modest in that the ERV elasticities are only 15% as large as price elasticities. Overall, US imports of salmon are much more sensitive to changes in relative prices and income than to changes in ERV. Bias in the estimated price and expenditure elasticities associated with omitting the ERV variables from the model in some cases is non-trivial.

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Exchange Rate Volatility and US Import Demand for Salmon Dengjun Zhang, University of Stavanger; Henry W. Kinnucan, University of Auburn A B S T R A C T In this article, a risk-augmented differential demand system is developed to test the effects of exchange rate volatility (ERV) on trade. Applying the model to data on US imports of salmon from Chile, Canada, Norway, the United Kingdom, and Rest of World (ROW), results indicate ERV reduces imports. The effect, however, is modest in that the ERV elasticities are only 15% as large as price elasticities. Overall, US imports of salmon are much more sensitive to changes in relative prices and income than to changes in ERV. Bias in the es- timated price and expenditure elasticities associated with omitting the ERV variables from the model in some cases is non-trivial. Key words: Exchange rate volatility, salmon, import, demand system. JEL Codes: D81, F14, Oil, Q17. I N T R O D U C T I O N Economic theory is ambiguous about the effects of exchange rate volatility (ERV) on trade. The basic reason is that there are countervailing effects: ERV creates uncertainty, but also op- portunities for profit (McKenzie 1999; Bahmani-Oskooee and Hegerty 2007). Depending on the relative strengths of the two effects, the trade-volatility relation may be upward sloping, flat, or downward sloping. Empirical research reflects this ambiguity. For example, in a study of trade flows between Brazil and the US, Bahmani-Oskooee, Harvey, and Heger

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