Dynamic and Stochastic Structures of U.S. Cotton Exports and Mill Demand
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This study employs a structural time-series method to model and estimate U.S.
cotton exports and mill use. The results show that the stochastic process governing
cotton export fluctuations is transitory, while the process pertaining to mill use has
transitory, seasonal, and secular origins. The estimated structural relationships
after accounting for the unobserved components indicate U.S. cotton exports
respond directly to higher international price relative to domestic price of cotton,
while mill use responds directly to U.S. textile output price and cotton-to-polyester
price ratio. Exchange rate volatility and the U.S. Export Enhancement Program
have no significant effect on cotton exports.