A Subsistence Linked Economy: The Case of the Solomon Islands

International Monetary Fund

No 1989/104, IMF Working Papers from International Monetary Fund

Abstract: How are money demand, income, and the price level affected when a significant portion of the economically active population reverts to and withdraws from subsistence economic activity? This paper tries to find a quantitative answer to the question by highlighting the specific link between the monetized and the subsistence economy that exists in the Solomon Islands: the producer price of copra, the main cash crop. The paper includes this variable explicitly in the money demand function of an aggregated macroeconomic simultaneous equation model and finds a significant impact throughout the economy.

Keywords: WP; price level; adjustment coefficient; income function; income variable; money demand function; Personal income; Demand for money; Monetary expansion; Producer prices; Inflation (search for similar items in EconPapers)
Pages: 20
Date: 1989-01-01
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