Does agricultural trade respond asymmetrically to oil price shocks? Evidence from New Zealand

Aust Econ Pap.2024;1–17.

Authors

Vatsa, Puneet; Baek, Jungho

Abstract

Do rising oil prices affect agricultural trade differentlyfrom falling oil prices? We answer this question usingdata on New Zealand, a net importer of oil and a netexporter of agricultural commodities. We consider adisaggregated approach, analysing exports and importsof five key commodity classes; nonlinear autoregressivelag models are employed to conduct the analysis. Wefind considerable evidence suggesting asymmetries inthe effects of oil price shocks on agricultural trade inthe long and the short run. Furthermore, in the longrun, agricultural exports and imports appear to belargely insensitive to foreign and domestic real income,respectively; there is limited evidence for imports andexports being associated with the real effectiveexchange rate. In the short run, however, income andexchange rates are associated with imports and exports.