The Impact of Exchange Rate Volatility on World Broiler Trade



Studies of how exchange rate volatility affects aggregate trade flows implicitly assume a uniform response across individual sectors. This is highly unlikely given that the responsiveness of trade to exchange rate fluctuations could depend on the biological, marketing, and economic factors specific to a commodity. Consequently, we focused solely on broilers for this analysis, which is a leading sector in global meat trade. Using a gravity model, we assessed how two measures of exchange rate volatility (short- and long-run) affect cross-partner broiler trade. Our results indicated that long-run exchange rate volatility has a negative and significant effect on broiler trade, albeit small when compared to the effects of population, regionalization, and sharing a common border; the short-run effect of exchange rate volatility was insignificant. Overall, results suggest that exchange rate volatility has little or no effect on bilateral broiler trade. [EconLit citations: C32, F14, Q17].