Agriculture and the macroeconomy

Maurice Schiff and Alberto Valdes ()

No 1967, Policy Research Working Paper Series from The World Bank

Abstract: Based on an economy-wide perspective, this paper begins with a discussion of the bias against exports and agriculture that characterized the economic literature and the development strategies in many developing countries after World War II. This is followed by an analysis of how the macroeconomic environment affects agricultural structural price incentives. Specifically, the paper discusses how early policies concerning industrial protection, exchange rates, and interest rates and other fiscal policies can strongly influence the economic incentives for agriculture compared with other sectors, identifying the most relevant literature and alternative approaches used on this issue. It then proceeds to examine how the real exchange rate can be affected by exogenous shocks, such as the foreign terms of trade, with emphases on the Dutch Disease phenomenon and agriculture. The paper next examines the influence of interest rates on incentives in agriculture, arguing that, surprisingly, this has been a neglected area in the literature. The paper explores the effects on agriculture of structural adjustment programs implemented since the early 1980s in developing countries. The final section surveys the literature on agriculture and the macro-economy in industrial countries, focusing on the impact of the exchange rate on export competitiveness in the United States, the cost of agricultural protection for the overall economy in Europe and Japan, and the increased importance of fluctuations in money markets for the farm sector and the additional instability they generate

Keywords: Macro-Fiscal Policy; Economic Theory & Research; Taxation & Subsidies; Economic Adjustment and Lending; Industrial Economics; Public Sector Economics; International Trade and Trade Rules; Food Security; Economic Development; Economic Growth; Public Finance Decentralization and Poverty Reduction (search for similar items in EconPapers)
Date: 1998-08-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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