Empirical Results:
Results of the estimated demand equations are reported in Table 1. All the variables had
the expected signs in both the models. Domestic production was negative and significant
in both the models at the one percent level indicating that as domestic production of
wheat in the importing countries’ increases they are likely to import less wheat from the
US. Exchange rate was negative and significant at the one percent level in both the
models indicating that an appreciation of the US dollar relative to the importing countries
currency decreases the amount of wheat imported from the US. GDP was also significant
at the five percent level in both the models indicating that an increase in importing
countries’ income increases the demand for US wheat. More importantly cost savings
from export credit was positive and significant at the 5 percent in both the models
supporting our theory of additionality. In model I, where the length of repayment was
more than 180 days, an increase in the present value of cost saving results in about a three
percent increase in the value of US imports. Our impacts are smaller compared to Diersen
(1995) who finds benefits from export credit programs result in a eight percent increase
in the quantity imported from the US.27 In model II where the length of repayment is
reduced to 180 days as proposed under the new WTO guidelines, cost savings result in a
2.5 percent increase in the value of US imports. Though the reduction in import value is
less than one percent following reduction in terms of repayment, this is significant when
we consider the overall value of wheat imports by the importing countries’ from the US.
27
The difference in results is due to the fact that our technique of calculating cost saving is different from
Diersen(1995) as explained earlier.
30