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FTA, Exchange rate pass‐through and export price behavior – Lessons from the Australian dairy sector

FTA, Exchange rate pass‐through and export price behavior – Lessons from the Australian dairy sector The growing number of bilateral and regional free trade agreements (FTAs) alongside exchange rate volatility has raised a question on whether these affect exporters’ pricing behaviors, hence competitiveness. This study contributes to this topic by examining Australian dairy export price behavior across eight major markets taking into account the extent of pass‐through of exchange rate and tariff as well as FTAs between Australia and its trading partners. Commodity‐level dairy trade data from 1996 to 2016 and the feasible generalized least squares methods are employed. The study finds incomplete pass‐through at the industry level. The dairy export prices decrease by 1.7% if Australian dollar depreciates by 10%, while 10% tariff reduction is associated with 0.7% export price cut. Results at the commodity level show different pricing behaviors across destination and commodity markets. Overall, apart from the tariff effects, there is minimal evidence of the impacts of FTAs on dairy export prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

FTA, Exchange rate pass‐through and export price behavior – Lessons from the Australian dairy sector

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Publisher
Wiley
Copyright
Copyright © 2021 Australian Agricultural and Resource Economics Society Inc.
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/1467-8489.12402
Publisher site
See Article on Publisher Site

Abstract

The growing number of bilateral and regional free trade agreements (FTAs) alongside exchange rate volatility has raised a question on whether these affect exporters’ pricing behaviors, hence competitiveness. This study contributes to this topic by examining Australian dairy export price behavior across eight major markets taking into account the extent of pass‐through of exchange rate and tariff as well as FTAs between Australia and its trading partners. Commodity‐level dairy trade data from 1996 to 2016 and the feasible generalized least squares methods are employed. The study finds incomplete pass‐through at the industry level. The dairy export prices decrease by 1.7% if Australian dollar depreciates by 10%, while 10% tariff reduction is associated with 0.7% export price cut. Results at the commodity level show different pricing behaviors across destination and commodity markets. Overall, apart from the tariff effects, there is minimal evidence of the impacts of FTAs on dairy export prices.

Journal

The Australian Journal of Agricultural Resource Economics – Wiley

Published: Jan 1, 2021

Keywords: ; ; ; ; ; ;

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