Disparate Exchange Rate Effects on Two Distinct Economic Sectors : U.S. Agricultural and Large-scale Manufacturing Sectors

This study re-visits the issue of the effect of real exchange rate on the agricultural sector during the recent period of the 1990 s, using a cointegration analysis developed by Johansen and Juselius(1994), and the result is compared to that of large-scale manufacturing sector. It was found the agricultural sector is, in general, more vulnerable to an exchange rate shock than the large-scale manufacturing sector. Analysis of the transmitted impact of exchange rates to other raviables in the sectors indicates significantly differentroles of exchange rate between the sectors. Exchange rates are exogenous in the agricultural sector, while they are endogenous in the large-scale manufacturing sector, implying that the U.S. agricultural sector has been a victim of prosperous U.S. economy, which caused the U.S. dollar appreciation in the 1990 s