Alternative measures of effective exchange rates for agricultural trade

Alternative measures of multilateral exchange rate changes appropriate for agricultural trade are analysed. The economic theory of index numbers was consulted in analysing published exchange rate indices and in constructing new indices. Comparisons among indices were made for the period 1970–1985, and differences were found to be significant. Results were particularly sensitive to the use of global rather than bilateral trade weights, used in the U.S. Department of Agriculture index. The relative importance of alternative exchange rate measures and trade elasticities is illustrated in terms of an agricultural trade model.