How Sensitive is U.S. Agricultural Trade to the Bilateral Exchange Rate?: Evidence from Bulk and Consumer-oriented Products

This paper examines the dynamic effects of changes in the bilateral exchange rate on changes in the bilateral trade of bulk and consumer-oriented agricultural products between the U.S. and its 10 major trading partners. We find that, for consumer-oriented products, U.S. exports are highly sensitive to the bilateral exchange rate and foreign income in both the short- and long-run, while U.S. imports are mostly responsive to the U.S. domestic income. For bulk products, on the other hand, U.S. exports and imports are driven largely by the income of the U.S. and its trading partners and less by exchange rate changes in both the short- and long-run.