Exchange rate regimes and global cocoa trade: to float or to peg?

Figures & data

Table 1. Variables and measurement

Variable	Measurement	Source
Net Exports	The net (export less imports) quantity of cocoa beans exported annually (in tonnes)	FAO
GDP	gross domestic product (millions of dollars)	World Bank
Real Exchange	real exchange rates	FAO
Openness	Openness to trade measured by exports plus imports all scaled by GDP	FAO
Exchange regime	1 if a country has a pegged exchange rates regime, 0 for floating.	FAO
Pegged to Euro	1 if the country’s currency is pegged to the Euro, 0 for otherwise.	FAO

Table 2. Summary statistics

Variables	Notation	Mean	SD	Min	Max
Net Exports	NE	163,719.50	241,205.60	−237,408.00	1,285,988.00
Gross Domestic Product	GDP	149,361.40	353,974.20	4445.00	2,616,000.00
Real Exchange Rate	REE	135.66	145.59	47.34	267.00
Openness to Trade	OPN	188.30	284.95	89.50	257.00
Exchange rate regime	ERR	0.28	0.45	0.00	1.00
Pegged to Euro	PEU	0.69	0.46	0.00	1.00

Table 3. Fixed effect model versus random effect model

Variables	RE	FE
	Ln Net export	Ln Net export
Ln GDP	0.816***	0.844***
	(0.0228)	(0.0224)
Ln Real Exchange	0.180***	0.196***
	(0.0317)	(0.0306)
Ln Openness	1.062***	1.081***
	(0.0212)	(0.0208)
Exchange regime	0.105	0.0900
	(0.0712)	(0.0694)
Pegged to Euro	−0.373***	−0.402***
	(0.0471)	(0.0454)
Constant	−2.405***	−2.743***
	(0.406)	(0.348)
Observations	341	341
R-squared	0.892	0.921
Number of stateno	10	10

Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1

Table 4. Hausman output

Variables	Coefficients
	(b)	(B)	(b-B)	sqrt(diag(V_b—V_B
	Fixed	Random	Difference	S.E
LnGDP	0.84422	0.8131898	0.0310322	0.0055349
LnRER	0.195653	0.1805704	0.0150825	0.0038057
LnOPN	1.081368	1.0625010	0.0188673	0.0047801
ERR	0.0899983	0.0773153	0.0126830	0.0122474
PEU	−0.4923632	−0.4474063	−0.0449569	0.0145602

b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

Chi2 (5) = (b–B)′ [(V_b—V_B)^(−1)] (b–B)

= 33.97

Prob>chi2 = 0.0000

Table 5. The fixed effect model with robust and clustering corrections

Variables	FE	FE cluster	FE robust
	Ln Net export	Ln Net export	Ln Net export
Ln GDP	0.844***	0.844***	0.844***
	(0.0224)	(0.0788)	(0.0788)
Ln Real Exchange	0.196***	0.196***	0.196***
	(0.0306)	(0.0354)	(0.0354)
Ln Openness	1.081***	1.081***	1.081***
	(0.0208)	(0.0985)	(0.0985)
Exchange regime	0.0900	0.0900***	0.0900***
	(0.0694)	(0.0237)	(0.0237)
Pegged to Euro	−0.492***	−0.492***	−0.492***
	(0.0840)	(0.103)	(0.103)
Constant	−2.714***	−2.714*	−2.714*
	(0.346)	(1.202)	(1.202)
Observations	341	341	341
R-squared	0.921	0.921	0.921

Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1