 The impacts of monetary policies on US agricultureS. Devadoss ISU General Staff Papers from Iowa State University, Department of Economics Abstract: The increased integration of the U.S. farm sector with the nonfarm sector, during the past decade, both domestically and internationally, led to significant implications for farm product prices, input costs, and farm income from developments in international and/or domestic economies. This is true, especially in light of the effects of exchange rates, interest rates, and inflation, all of which are influenced by macroeconomic policies and capital markets, on the farm sector. However, much of the literature in the area of macroeconomics of agriculture mainly focused on the linkage between exchange rates and agricultural commodity trade; relatively little attention has been given to other macrointerconnections such as interest rates, inflation, and income linkages;This study examines the interrelationships between the macrosector and agriculture by incorporating exchange rates, interest rates, inflation, and income linkages in a general equilibrium macroeconometric model. Using this model, the effects of changes in U.S. monetary policies on the U.S. farm sector (particularly on crop prices, livestock product prices, crop production and demand, exports, inventories, livestock production and demand, and farm incomes) are examined through these four linkages;Since the exchange rate is an important monetary factor that influences the agricultural commodity trade, in this study, the exchange rate is endogenized by following the monetary approach to exchange rate determination. The sample period of the study is 1950-1982. The estimated model has good statistical properties. In particular, all the coefficients related to the four macrolinkages are consistent with a priori expectations and, thus, provide evidence for the hypothesis that macroeconomic developments are very important for the hypothesis that macroeconomic developments are very important for U.S. agriculture;The results indicate that the effect of money supply changes on agricultural trade and prices would be magnified if a more complete set of linkages are specified rather than specifying only the exchange rate linkage. Furthermore, the simulation results show that an expansionary monetary policy has a positive impact on the farm sector, since such a policy increases the farm prices and income through the above-mentioned four linkages. On the other hand, a contractionary monetary policy has an adverse effect on the farm sector by decreasing farm prices and incomes. Date: 1985-01-01 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:198501010800008837 Access Statistics for this paper More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC. |
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