DT 29/19 - Exchange Rate Uncertainty and Cereal Exports: A Panel VAR Approach

This paper investigates empirically the effect of exchange rate uncertainty on cereal export flows for a broad sample of countries during the period 2010/01 – 2016/12. To do this, we first estimate the exchange rate volatility using the moving standard deviation of the real effective exchange rate (REER), and then, we estimate the cereal export demand by using a panel data model with autoregressive vectors (P-VAR). This strategy of analysis is applying over different groups of countries, which are obtained by cluster analysis based on the level of REER volatility and the level of cereal export volume. In general, the empirical results suggested a significative negative effect of exchange rate uncertainty on cereal exports in countries characterized by high and persistent REER volatility or high volume of cereal exports (i.e. with market power).