Triangular Exchange Rate Parities and u.s. Wheat Exports (United States)

Abstract

This study deals with the effects of exchange rates on U.S. wheat exports. The role of exchange rates is examined in the context of an econometric model of foreign demand for U.S. wheat in which U.S. wheat exports are disaggregated into exports to Less Developed Countries, Socialist Countries and the rest of the world. The structure of the model emphasizes foreign demand determinants rather than domestic excess supply ones. The results suggest that exchange rates between the U.S. and its competitors especially Canada, influence U.S. wheat exports more than the U.S. exchange rates vis-a-vis its farm customers.

The implications of different degrees of exchange rate flexibility are investigated using a single import-demand equation model. Combining cross-section/time-series data for sixteen Less Developed Countries, the equation is estimated as a pooled regression. In general, the results agree with those obtained earlier and appear to support the hypothesis that to a certain extent alternative exchange rate regimes are associated with differences in individual-country demand for U.S. wheat. However, when the estimation is undertaken in the context of a system of Seemingly Unrelated Equations, significant differences are revealed in individual-country parameters which do not seem to be systematically associated with any of the factors considered in the analysis.