Dallas S. Batten

Monetary Policy, Real Exchange Rates, and U.S. Agricultural Exports

interest rates will attract capital to dollar money market instruments, which in turn will cause the value of the dollar to rise in foreign exchange markets. A stronger dollar makes our exports more expensive to other countries, thereby reducing the quantity demanded, and it also causes the price of imports into the United States to decline in dollar terms, creating competitive pressures for domestic imports [sic] that compete with imports such as the automobile, steel and textile industries. The monetary authorities accomplish what they want to accomplish, but the burden of adjustment is borne by the export sectors and the sectors that have strong import competition. In this way, one can see that the problems of agriculture and the automobile industry in the early 1980s have been cut in part from the same cloth-a period of very tight monetary policy.

Discount rate changes and the foreign exchange market

Changes in the discount rate can have an associated announcement effect on the foreign exchange value of the dollar only if these changes are not anticipated by the market. This paper provides evidence to support this contention. Specifically, discount rate changes made for reasons other than technical adjustments have not been anticipated fully and consequently, their announcement has had a significant impact on the dollars exchange rate. Furthermore, results are obtained that support the hypothesis that unanticipated discount rate changes alter the expectation of the rate of future inflation.

A note on Almon's endpoint constraints

In this paper, we show that Almons (1965) endpoint constraints do not constrain the endpoints, as commonly thought. In particular, the endpoints are not constrained to equal zero. Consequently, these constraints have neither a basis in economic theory nor the econometric justification frequently ascribed to them.

The Andersen-Jordan equation, revisited

Abstract This paper deals with two common econometric criticisms of the Andersen and Jordan (1968) equation—the endogeneity of the right-hand-side variables and the ad hoc implementation of Almons polynomial distributed lag estimation technique. Using the original Andersen-Jordan data, we found no support for either criticism. While we note that the PDL specification of their equation is highly unusual, we found that their policy conclusions do not depend their particular choice of lag length or polynomial degree or their imposition of the endpoint constraints. Furthermore, the right-hand-side variables were found to satisfy necessary conditions for statistical exogeneity.