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Decomposing Changes in Agricultural Producer Prices

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  • William M. Liefert

Abstract

This paper develops a method for decomposing changes in agricultural producer prices. The method builds on a procedure used by the World Bank, with the key variables in the decomposition being trade prices, exchange rates, and agricultural trade policies. The main ways by which we expand on the World Bank decomposition procedure are by broadening the analysis of policy effects, and by adding the effect from incomplete transmission of changes in border prices and exchange rates to producer prices, and the effect on prices from interactions between variables as they change simultaneously. We demonstrate the decomposition method by using the Russian poultry market in the late 1990s, and find that the dominant factor in changing the producer price was the large depreciation of the ruble. Many developing and transition economies have fluctuating exchange rates. The decomposition method presented in this paper could be used to test the hypothesis that exchange rate movements are the main cause of changes in these countries' agricultural commodity prices. Another hypothesis that the method could help test is that an important factor in affecting countries' agricultural prices is incomplete transmission of changes in trade prices and exchange rates to domestic prices, where the incomplete transmission is mainly caused not by policy, but rather by undeveloped market infrastructure.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Agricultural Economics.

Volume (Year): 62 (2011)
Issue (Month): 1 (02)
Pages: 119-136

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Handle: RePEc:bla:jageco:v:62:y:2011:i:1:p:119-136

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References

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  1. Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier.
  2. William M. Liefert, 2011. "Decomposing Changes in Agricultural Producer Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(1), pages 119-136, 02.
  3. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
  4. Valdes, A., 2000. "Agricultural Support Policies in Transition Economies," Papers 470, World Bank - Technical Papers.
  5. Valdes, A, 1996. "Surveillance of Agricultural Price and Trade Policy in Latin America during Major Policy Reform," World Bank - Discussion Papers 349, World Bank.
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As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Agricultural Economics > Agricultural Policy
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Cited by:
  1. Liefert, William M., 2006. "Decomposing Changes in Agricultural Producer Prices," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25331, International Association of Agricultural Economists.
  2. Siudek, Tomasz & Zawojska, Aldona, 2011. "Relationship of Development and Fiscal Indicators with Agricultural Producer Support in the OECD Economies," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116009, European Association of Agricultural Economists.
  3. Cáceres-Hernández, José Juan & Martín Rodríguez, Gloria & González Gómez, José Ignacio & Nuez Yánez, Juan Sebastian, 2013. "ana exports. Are product withdrawal decisions rational?," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 13(2).
  4. Liefert, William M. & Liefert, Olga, 2007. "Distortions to Agricultural Incentives in Russia," Agricultural Distortions Working Paper 48386, World Bank.

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