Exchange Rate Risk and the U.S. Export of Wheat

Abstract

This study examines the effect of real exchange rate risk on the U.S. export of wheat for the period of 19731992. Theoretical arguments for a positive relationship between exchange rate risk and export activity are presented. Two simple models of export demand and supply are used to develop models for export volume and export price. The price and volume models are estimated using simultaneous non-linear three stage least square procedures. The estimated models are then used to examine the dynamic impact of exchange rate changes and exchange rate risk on the U.S. export of wheat. Results indicate that increase in exchange rate risk may actually increase exports. (Fl4, F31)