Impact of Exchange Rate Volatility on the Agricultural Export Revenues: Evidence from China-USA Trade
Hua Wang *
Dankook University, 152, Jukjeon-ro, Suji-gu, Yongin-si, Gyeonggi-do, 16890, Korea.
*Author to whom correspondence should be addressed.
Abstract
The research states that there is an impact of exchange rate volatility on the agricultural export revenues of China. The agricultural sector is one of the most important industries in China, which contributes significantly to the GDP. However, the nation also exports a substantial level of products to the United States. Given the recent global shocks, the study aims to analyse the impact of exchange rate volatility on China's agricultural export revenue. Using agricultural export data as well as macroeconomic data from China between 1994 and 2023, a quantitative analysis has been performed to understand the relationship between exchange rates and agricultural exports. An OLS regression is used as the primary method to examine the linear relationship, while ARDL and NARDL models are applied to explore the long-term and asymmetric effects of exchange rate volatility. Based on this, it has been found that higher levels of exchange rate instability significantly reduce both agricultural export volumes and total export revenues. Agricultural export revenues reduce by -2.7539 percentage points, whereas total exports decrease by 1.5692 percentage points. ARDL and NARDL model finds negative impact of ERV shocks on agricultural export revenue. These results highlight the importance of exchange rate stability in maintaining China’s agricultural trade performance, as maintaining exchange rate risk is key for government.
Keywords: Currency volatility, OLS regression, agricultural production, international trade theory, agricultural exports