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Granger Causality From The Exchange Rate To Agricultural Prices And Export Sales

Author

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  • Bradshaw, Girard W.
  • Orden, David
Abstract
In-sample and out-of-sample Granger causality tests are applied to determine whether the real trade-weighted agricultural exchange rate helps predict monthly real prices and export sales of wheat, corn, and soybeans. An ARIMA model, alternative univariate and bivariate autoregressive models, and a restricted bivariate autoregressive model based on Hsiao's procedure are specified for each variable. Results of the causality are shown to be sensitive to specification choice. Forecasting performance of the models is compared and out-of-sample Granger causality is determined using univariate and bivariate models with the best (lowest mean-square forecast error) forecasting accuracy. These tests provide evidence supportive of Granger causality from the exchange rate to export sales, while the evidence on causality from the exchange rate to prices is mixed.

Suggested Citation

  • Bradshaw, Girard W. & Orden, David, 1990. "Granger Causality From The Exchange Rate To Agricultural Prices And Export Sales," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(1), pages 1-11, July.
    • Handle: RePEc:ags:wjagec:32503
    DOI: 10.22004/ag.econ.32503
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    References listed on IDEAS

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    1. Orden, David, 1986. "Agriculture, trade, and macroeconomics: The U.S. case," Journal of Policy Modeling, Elsevier, vol. 8(1), pages 27-51.
    2. Dallas S. Batten & Michael T. Belongia, 1984. "The recent decline in agricultural exports: is the exchange rate the culprit?," Review, Federal Reserve Bank of St. Louis, vol. 66(Oct), pages 5-14.
    3. Bessler, David A & Babula, Ronald A, 1987. "Forecasting Wheat Exports: Do Exchange Rates Matter?," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 397-406, July.
    4. Ashley, R & Granger, C W J & Schmalensee, R, 1980. "Advertising and Aggregate Consumption: An Analysis of Causality," Econometrica, Econometric Society, vol. 48(5), pages 1149-1167, July.
    5. Bradshaw, Girard W. & Orden, David, 1988. "Time Series Models For Exchange Rate And Agricultural Price Forecasts," Regional Research Projects > 1988: S-180 Annual Meeting, March 20-23, 1988, Savannah, Georgia 272786, Regional Research Projects > S-180: An Economic Analysis of Risk Management Strategies for Agricultural Production Firms.
    6. Dallas S. Batten & Michael T. Belongia, 1986. "Monetary Policy, Real Exchange Rates, and U.S. Agricultural Exports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 422-427.
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