The pass‐through of exchange rate changes to the prices of Australian exports of dairy and livestock products

Abstract

Agricultural exports are usually assumed to operate in perfectly competitive international markets, but many are subject to non-tariff barriers to trade that can affect the degree of pass-through of exchange rate changes to foreign currency prices. The present study uses multivariate cointegration techniques to examine the effects of exchange rate changes on the prices of Australian exports of milk products, cheese, beef, sheepmeat, and hides and skins. The results indicate that Australian dairy exports operate in competitive markets in which pass-through is complete, but there is no stable long-run relationship between exchange rates and prices for any of the other livestock products.

FTA, Exchange rate pass‐through and export price behavior – Lessons from the Australian dairy sector

“…Studies for example Saha and Zhang (2016) and Mallick and Marques (2008) show that ERPT and TRPT to the trade price in the agricultural sector such as dairy is less than those of mining and manufacturing industries. The study, however, finds a different result from Swift (2004) who finds a complete pass‐through for dairy.…”

“…The study finds that the Ricegrowers’ Cooperative Limited has been able to price discriminate between destinations through varying mark‐ups and in its response to the exchange rate change (Griffith and Mullen 2002). Meanwhile, Swift (2004) uses multivariate cointegration techniques to examine the effects of exchange rates changes on the prices of Australia exports of milk products, cheese, beef, sheepmeat and hides and skins using monthly data from July 1985 to June 1996. The study finds different results between the dairy products group and other commodities.…”

“…On dairy products, the study observes a complete pass‐through in Australian dairy exports. However, it highlights that the reduction in import barriers over the study period was minimal, and an assessment of the effects of subsequent trade reforms may shed some light on possible changes in exchange rate pass‐through for the sector (Swift 2004). The period covered by the present study which includes the commencement of FTAs between Australia and its trading partners shows a contribution of this study to address those trade‐related aspects.…”

Market power and import bans: the case of Japanese pork imports

“…This is exactly what one would expect of firms operating under imperfect competition. A number of studies in the literature investigated the ERPT behavior of agrifood exporters (Gervais & Khraief, 2007; Gervais & Larue, 2009; Miljkovic, Brester, & Marsh, 2003; Swift, 2004), and all uncovered evidence of market power.…”

Implications of the Structural Change in Dairy Products Trade on Milk Price Paid to Producers in Chile

“…The long run relationships provide insights of how equilibrium relationships are restored and how new equilibrium levels can be obtained after a shock to the cointegrated system has occurred (Mohanty et al, 1996). Cointegration analysis has been used in several time series studies that attempt to identify the long run relationship among variables within a market system (Goodwin, 1992;Mohanty et al, 1996;Alavalapati et al, 1997;Chang and Griffith, 1998;Miljkovic, 1999;Mohanty et al, 1999;Aguiar and Santana, 2002;Swift, 2004).…”