Linking Exchange Rates, Market Failures and Agricultural Land Demand

Jamal Othman
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Jamal Othman: Faculty of Economics Universiti Kebangsaan Malaysia 43600 UKM Bangi Selangor Darnl Ehsan

Jurnal Ekonomi Malaysia, 2000, vol. 34, 21-37

Abstract: The financial crisis of 1997/98 has provided the so-called “sun set†agricultural sector a rejuvenated role as a growth impetus. This leads fo concerns as to whether agricultural augmentation would pose significant repercussions all the pattern of natural resource use, especially land factor. This paper explores whether sustained depreciation on The Malaysian Ringgit will pose significant impacts on agricultural land demand in the country with special focus on The oil palm sub-sector. A comparative static, single commodity model with explicit land factor is employed. Analysis shows thaI a prolonged Ringgit depreciation of 40 percent ceteris paribus will have substamial impacts on land demand (about 10 percent for the oil palm sub-sector). In reality, expansion of oil palm land-use could be greater as other crops, especially rubber is steadily being converted to oil palm due to relative commodity price changes and rising production cost.

Date: 2000
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