Exchange Rate Volatility and the Resilience of Agricultural Export Earnings: Does Financial Depth Provide Insulation?

Agricultural exports are particularly exposed to currency risk, since production is seasonal, margins are thin, and the sector depends on imported inputs whose costs move with the exchange rate. Deeper financial systems are expected to reduce this exposure by giving exporters access to hedging instruments. This study examines agricultural export earnings in 26 advanced and emerging economies over 2000–2023, which, together, account for about three-quarters of world agricultural exports. Country-specific responses of real agricultural export earnings to real effective exchange rate (REER) volatility are estimated with the Common Correlated Effects Mean Group (CCEMG) estimator and subsequently related to financial depth through precision-weighted meta-regressions. Volatility is associated with lower export earnings in both levels and mixed-order specifications, with mean group estimates ranging from about −1.5 to about −2.5, and responses vary considerably across countries. Greater financial depth does not reduce this exposure in any specification. In the levels specification, agricultural exporters in countries with deeper banking systems respond more negatively to volatility (γ = −0.032; p = 0.043), but this result depends on a single influential country and does not persist when non-stationary variables enter in first differences. The resilience of agricultural export earnings therefore appears to depend less on the size of the domestic credit market than on whether currency risk management instruments are accessible to agricultural exporters, a distinction that matters for the monitoring of progress under Sustainable Development Goal Target 8.10.