What explains international agricultural trade of the EU and Germany?
Theoretical and econometric investigations of liberalization, macroeconomic effects and hysteresis
Project team: Prof. Dr. R. Herrmann (ZEU), Prof. Dr. M. Göcke (Transformation Economics),
The rising volatility of world prices and the recent food price booms demonstrate the increasing dominance of uncertainty in international agricultural trade. Macroeconomic fluctuations and their influence on agricultural markets are getting stronger than before, as the coherence between energy and food markets is becoming closer, and as the level of the world demand is constantly growing.
International agricultural markets are deeply influenced by agricultural policy liberalization in developed countries. Despite of growing uncertainty, liberalization requires that competitive enterprises in agricultural and food industry generate higher income on free markets, where investments in market entry, sunk costs and path dependencies are preconditions for success in international trade.
Research cooperation occurs between an agricultural economics working group (Prof. Herrmann) and an economics working group (Prof. Göcke). In this project, the factors which influence agricultural trade of Germany and the European Union (EU) are elaborated theoretically and empirically. It can be expected that price liberalization, macroeconomic shocks and path dependencies affect the value of agricultural trade and its components, i.e. market prices and traded volumes. Empirical analyses will refer to total agricultural trade and the trade of specific goods and will rely on trade models such as the gravitation and the pricing-to-market approach. In particular, hysteresis concepts will be integrated systematically into the studies of agricultural trade.