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The Impacts Of Monetary Policy On The Maize And Beef Sectors Of South Africa Ii: Model Estimation And Simulation Results

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  • Dushmanitch, V. Y.
  • Darroch, M. A. G.

Abstract

A general equilibrium simultaneous equation model is constructed to analyse the impacts of monetary policy on the maize and beef sectors of South Africa. The model is estimated by three-stage least squares and used to simulate the dynamic impacts of an expansionary monetary policy (15 percent increase in money supply) from 1975 to 1987. In the short run, this causes real interest rates to fall, real income to rise, exchange rate to depreciate and prices to rise. Rising real incomes cause beef demand to increase and human maize consumption to fall. Depreciation of the exchange rate and higher domestic inflation raise real input prices. This impacts negatively on maize and beef supply. Higher beef prices encourage beef production, which causes animal maize demand to increase. Lower real interest rates impact positively on maize supply, negatively on beef supply, and stimulate real agricultural investment. The net effect is a decline in real gross farm income in the maize and beef sectors of South Africa.

Suggested Citation

  • Dushmanitch, V. Y. & Darroch, M. A. G., 1992. "The Impacts Of Monetary Policy On The Maize And Beef Sectors Of South Africa Ii: Model Estimation And Simulation Results," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 31(1), March.
    • Handle: RePEc:ags:agreko:267508
    DOI: 10.22004/ag.econ.267508
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    References listed on IDEAS

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    1. G. Stadler, 1981. "The Demand for Money in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 49(2), pages 89-94, June.
    2. E. Contogiannis & M. A. Shahi, 1982. "The Demand for Money and Inflationary Expectations in South Africa, 1965–1980," South African Journal of Economics, Economic Society of South Africa, vol. 50(1), pages 16-22, March.
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    Cited by:

    1. Fenyes, Tamas I. & Meyer, Nicolas G., 1998. "Agricultural Policy And Macroeconomic Issues In South Africa In Perspective," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 37(1), pages 1-23, March.

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