Ronald A. Babula

Forecasting Wheat Exports: Do Exchange Rates Matter?

A vector autoregression is fit to recent U.S. data on wheat prices, wheat export sales, wheat export shipments, and exchange rates. Forecast error decompositions and out-of-sample forecasts indicate that exchange rates have little influence on wheat sales and shipments.

U.S. corn exports: the role of the exchange rate

Time series econometric methods are applied to monthly observational data over the period 1978-1992 on real exchange rates, real corn prices, corn export sales, and corn export shipments for the United States. In-sample fit and out-of-sample forecast results are used to discern whether exchange rates have elicited systematic responses in U.S. corn prices, sales and shipments, and whether the dynamic transmission mechanisms tying these variables together have changed over time. A structural break appears to have occurred in early 1985. No cointegration is found between exchange rates, price, sales, and shipments in either sub-period. Influences are all short-run or between stationary variables. The role of the exchange rate appears to have moderated in the post-1985 period. Implications for policy analysis are discussed.

Dynamic Relationships Among U.S. Wheat-Related Markets: Applying Directed Acyclic Graphs to a Time Series Model

Using advanced methods of directed acyclic graphs with Bernanke structural vector autoregression models, this article extends recent econometric research on quarterly U.S. markets for wheat and wheat-based value-added products downstream. Analyses of impulse response simulations and forecast error variance decompositions provide updated estimates of market elasticity parameters that drive these markets, and updated policy-relevant information on how these quarterly markets run and dynamically interact. Results suggest that movements in wheat and downstream wheat-based markets strongly influence each other, although most of these effects occur at the longer-run horizons beyond a single crop cycle.

The corn-egg price transmission mechanism.

A vector autoregression (VAR) model of corn, farm egg, and retail egg prices is estimated and shocked with a corn price increase. Impulse responses in egg prices, t-statistics for the impulse responses, and decompositions of forecast error variance are presented. Analyses of results provide insights on the corn/egg price transmission mechanism and on how corn price shocks pulsate through the egg-related economy.

U.S. Canned Tuna Supply and Demand

Abstract A 3SLS econometric model is used to estimate price elasticities of supply and demand for domestically produced and imported canned tuna in the U.S. market. In addition, a VAR model is developed to examine the relations between imports and domestically produced canned tuna. For domestically produced canned tuna, a 3SLS estimation of a structural econometric model yielded a coefficient for price elasticity of supply of 0.2 and of own-price demand of −0.3. Such price inelasticities are expected of a fishery exploited at or near its maximum yields (inelastic supply), and a consumer product widely viewed as almost a necessity in a well-stocked pantry (inelastic demand). In addition, the model yielded a cross-price elasticity of demand with respect to the price of imported canned tuna of 0.45. Additional results include an income elasticity U.S. demand for domestically packed tuna of 0.83; a cross-price elasticity with the price of bread (a complement) of −0.33, a cross-price elasticity for the price of ground meat (a substitute) of 0.30. With respect to imported canned tuna in the U.S. market, the corresponding elasticities estimated in the model are −1.3 (own-price demand), 3.5 (income elasticity), −1.2 (cross-price with the price of bread) and 2.5 (cross-price with the price of ground meat). For canned tuna company managers, the results provide useful information about the likely effects on sales that would come from their own price changes, from changes in the price of imported canned tuna, and from price changes in the markets for complementary and substitute products. They can also use our results in discussions with U.S. trade negotiators, who are frequently faced with disputes over tariffs, market access, and other trade issues.

Dynamic impacts of a shock in crude oil price on agricultural chemical and fertilizer prices

A monthly vector autoregression (VAR) model of the following prices was estimated over the 1962:1-1990:6 period: crude oil price (CRUDE), industrial chemical price (INDCHEM), agricultural chemical price (AGCHEM), and fertilizer price (FERT). The VAR was shocked with a rise in CRUDE, and dynamic impulse response patterns in AGCHEM and FERT were observed. Results suggest that AGCHEM and FERT responses would be increases; would be mild for half a year; would thereafter gain in strength and peak within 19 to 21 months; and would last for 2.0 to 2.3 years. AGCHEM and FERT would rise by about one-fourth of the percentage increase in CRUDE which occurs over the response period.

A time series analysis of Danish markets for pork, chicken, and beef

Abstract We offer a first-time empirical depiction of Danish dynamic meat price/quantity transmissions by formulating, estimating, and testing a VAR model of market-clearing quantities and prices of the Danish pork, chicken, and beef markets. The analysis illuminates how these markets dynamically handle shocks, and it is demonstrated that: (i) the three meats are close substitutes; (ii) chicken and pork market shocks have own-market and cross-market effects that occur rapidly and swiftly, while beef market shocks have more enduring impacts on pork and chicken markets; (iii) prices are in general more endogenous than quantities; and (iv) the price of chicken is much more endogenous than the prices of pork and beef.

Role of empirical evidence in US|Canadian dispute on US imports of wheat, wheat flour, and semolina

This article summarizes the 1994 US|Canadian wheat dispute, and critically compares the analyses of the USDA and Canadian Wheat Board (CWB), with the analysis done by the staff of the US International Trade Commission (USITC staff). The USDA and CWB studies are shown to have primarily relied on “expert opinion,” with the result that data and evidence were not given adequate analytical roles in the analyses. The USDA and CWB studies provided a range of estimates of US wheat program cost effects from Canadian imports that was excessively wide. The USITC staffs empirical model is shown to be a more balanced mix of theory and evidence than the other two analyses, and suggests that such program cost effect estimates fell well between the extreme USDA and CWB estimates.

Dynamic Impacts of Rising Lumber Prices on Housing-Related Prices

A monthly vector autoregression model of lumber, lumber futures, construction materials, housing, and shelter prices was shocked with a 10% lumber price increase, and dynamic responses were examined. Futures and materials price increases were immediate and endured 1 and 3 years, respectively. Housing and shelter price increases required at least 9 months to begin, and endured for about 3 years. Effects on materials, housing, and shelter prices were less than one-for-one. Price effects from a 10% future price increase imposed on the model were more delayed, weaker, and less enduring than those generated by lumber price shocks. ©1994 by John Wiley & Sons, Inc.

A Comparative Static Analysis of European Union Tariff and Support Policies for Canned Pears

Abstract A nonlinear, partial equilibrium, Armington model of the European Union canned pear market was built and simulated for reductions in specific EU policies and for reductions in selected combinations of these policies relevant to canned pears: import tariffs, factor subsidies, and an output subsidy. Effects of these policy reductions on the following EU canned pear market variables were comparatively analyzed: own-product consumption, imports, exports, and price. Comparative analyses of these policy-specific effects were conducted from two viewpoints: the absolute magnitudes of completely eliminating, and the marginal effects of incrementally reducing, the EU policies and policy combinations. Among other findings, results suggest that EU tariff reduction enhances EU imports more than EU subsidy reduction, and that EU subsidy reduction increases EU prices more effectively than reducing EU tariffs.