EXCHANGE RATE MOVEMENTS AND THE MAIZE TRADE BETWEEN MEXICO AND THE UNITED STATES

Abstract

For maize trade flows between Mexico and the United States, movements in the exchange rate are important, along with some other variables. With the objective to contribute with relevant information on the impact of the exchange rate on the maize trading flows behaviour, in a context of production subsidies; As well as to generate relevant information for economic policy decision making, an expected utility maximization model was analyzed, and a demand function was estimated for maize imports within a cointegration analysis and a vector error correction model (VCE). Results showed that changes in the real exchange rate have a positive effect on trade flows, while exchange rate volatility poses a negative effect on trade flows. The results of the hypothesis test indicated that both changes on the real exchange rate and on volatility have a significant effect on maize trading flows between Mexico and the United States.