<p>I think you're getting tripped up by notation. Instead of LOC/\$, write \$/LOC, since international trade is most likely to take place using $USD as an intermediary currency.  </p>

<p>Here's an example:</p>

<p>Suppose world prices for soybeans are \$150/ton USD.  Today, the Wakandan widget (W) trades at 75W/\$ - so, I suggest rewriting this as $1/75W. Then, absent tariffs, taxes, and other frictions, Wakandans can import US soybeans at 11,250W/ton.</p>

<p>Now suppose the widget depreciates - it now trades at 150W/\$.  Notice that the sign of this change is positive, because you need more LOC to buy a unit of USD.  But if you rewrite as $1/150W, the sign of this change is negative, fitting the intuition that the LOC has become <em>less</em> valuable.  And indeed, now Wakandans must pay 22,500W/ton to import US soybeans - a change that would be reflected by a positive sign.</p>

<p>The value change of the LOC is negative, leading to a positive change in the price for imports. Make sense?</p>

CC BY-SA 4.0
2020-01-06T22:07:41.203Z
Yes, make sense. I think in this way, but the notation LOC/$ is used several times in this article. Did you read it?
los6996
CC BY-SA 4.0
2020-01-06T22:34:16.107Z
It's just an inverse of the ratio, and is mathematically consistent either way.  The way I present it is just more in-line with the intuition that is leading to your confusion (and understandably so).  You'll run into this a lot in almost any field - being a good researcher, and writing easily-readable research, are two different skillsets.  Not everyone is a master of both.  :)
heh
CC BY-SA 4.0
2020-01-06T21:58:15.393Z
2020-01-06T21:58:15.393Z
heh
<p>I have problem with an article Lee H., C. Park, 2013, International Transmission of Food Prices and Volatilities: A Panel Analysis.</p>

<p>Authors wrote:
Difference in log of exchange rates (LOC/ $)- As depreciation of local currency (LOC) against the US dollar will result in higher domestic prices of imported food products in local currency, this variable is expected to carry a positive sign. </p>

<p>Variable (LOC/$) has positive sign in there econometric model. How it is possible?</p>

<p>When exchange rate (LOC/$) rises we have aprreciation of local currency so food prices are lower. I think that the sign should be negative</p>

<p>Can someone help me?</p>

<exchange-rates><price><food>
Depreciation of local currency and its effect on prices
los6996
# Depreciation of local currency and its effect on prices

(Asked by: username_0 on 2020-01-06)

I have problem with an article Lee H., C. Park, 2013, International Transmission of Food Prices and Volatilities: A Panel Analysis.

Authors wrote:
Difference in log of exchange rates (LOC/ $)- As depreciation of local currency (LOC) against the US dollar will result in higher domestic prices of imported food products in local currency, this variable is expected to carry a positive sign.

Variable (LOC/$) has positive sign in there econometric model. How it is possible?

When exchange rate (LOC/$) rises we have aprreciation of local currency so food prices are lower. I think that the sign should be negative

Can someone help me?

**Tags:** exchange-rates, price, food


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## 1 answers

### Answer by username_1 on 2020-01-06. Score: 1

I think you're getting tripped up by notation. Instead of LOC/\$, write \$/LOC, since international trade is most likely to take place using $USD as an intermediary currency.

Here's an example:

Suppose world prices for soybeans are \$150/ton USD. Today, the Wakandan widget (W) trades at 75W/\$ - so, I suggest rewriting this as $1/75W. Then, absent tariffs, taxes, and other frictions, Wakandans can import US soybeans at 11,250W/ton.

Now suppose the widget depreciates - it now trades at 150W/\$. Notice that the sign of this change is positive, because you need more LOC to buy a unit of USD. But if you rewrite as $1/150W, the sign of this change is negative, fitting the intuition that the LOC has become *less* valuable. And indeed, now Wakandans must pay 22,500W/ton to import US soybeans - a change that would be reflected by a positive sign.

The value change of the LOC is negative, leading to a positive change in the price for imports. Make sense?

> **Comments:**
> **username_0**: Yes, make sense. I think in this way, but the notation LOC/$ is used several times in this article. Did you read it?  
> **username_1**: It's just an inverse of the ratio, and is mathematically consistent either way.  The way I present it is just more in-line with the intuition that is leading to your confusion (and understandably so).  You'll run into this a lot in almost any field - being a good researcher, and writing easily-readable research, are two different skillsets.  Not everyone is a master of both.  :)  

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