Date of Award

2011

Document Type

Thesis

Abstract

The share of U.S. pork exports in the world market has grown considerably in recent years. China has become a major importer of U.S. pork products as its per capita income growth has led to a population demanding higher quality meats. One major barrier U.S. producers/exporters face is a yuan that is subject to significant intervention. At present, the yuan is officially under a managed floating exchange rate based on market supply and demand with reference to a basket of foreign currencies, the main one being the U.S. Dollar. It is currently allowed to float in a narrow range of 0.5% around the central parity published by the People’s Bank of China (PBC) daily. Demands to let the yuan float within a greater range have grown in the past few years as major economies have struggled with large trade imbalances. As the yuan appreciates in value against the dollar, U.S. pork exporters should enjoy increased demand due to increased purchasing power of the Chinese consumer. However, as the yuan is allowed to float within a greater range, exchange rate volatility also increases. Various research efforts have demonstrated both negative and positive effects on trade due to increased exchange rate volatility. Using quarterly data, this study attempts to measure the level of exchange rate volatility that exists between U.S. and Chinese pork markets, and its effect on U.S. pork exports during the period of 1995 through 2009. Multiple measures of volatility were investigated with one exhibiting a negative and statistically significant impact on export values while the other yielding a positive impact, but not at a statistically significant level. The results suggest exchange rate volatility may have a negative impact on U.S. pork exports to China, especially as the yuan moves toward market valuation.

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