Are Agri-food Exports any Special? Exchange Rate Nonlinearities in European Exports to the US

Abstract

Using aggregated EMU exports to the US as an example, VERHEYEN (2013a) showed, that in the long run exports react to exchange rate changes in a nonlinear way. This paper tests whether this holds true for agri-food exports as well. To address this question a partial sum decomposition approach and the NARDL framework of SHIN et al. (2013) is applied to the aggregated agri-food exports of eleven European countries to the US, which is currently the major partner of the EU in agricultural trade. The outcomes suggest, that the exchange rate nonlinearities are even more pronounced in agri-food than in total exports. European exporters seem to benefit more from Euro depreciation, than its appreciation harms them. These findings might be interpreted as a sign of pricing strategies application (e.g., pricing-to-market) to the European agri-food exports.