Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy: The Case of Slovenia
AbstractThe paper focus on the time adjustment paths of the exchange rate and agricultural producer and industrial prices in response to unanticipated monetary shocks following model developed by Saghaian et al. (2002). We employ Johansen's cointegration test along with a vector error correction model to investigate whether agricultural producer prices overshoot in a transition economy. Results indicate that agricultural prices adjust faster than industrial prices to innovations in the money supply, affecting relative prices in the short run, but strict long-run money neutrality does not hold. The impulse response analysis shows that an exogenous shock to the money supply has a significant and volatile effect on the three price variables. Initially, both the agricultural producer prices and industrial prices undershoot their long-run path. Industrial prices recover in the fourth, agricultural producer prices in sixth month. The extent of overshooting in agricultural prices is twice as large as for exchange rates or industrial prices. This indicates that in the case of monetary shocks the sectors associated with flexible changes bear the burden of adjustment vis-à-vis the sectors with sticky changes. The exchange rate pass-through on agricultural producer prices revealed by the forecast error variance analysis indicates the relatively greater importance of the exchange rate than the money supply in explaining the expected variation of the agricultural producer price. This is consistent with floating exchange rate policy, while agricultural trade policy for sensitive products has been more restricted until Slovenia joined the European Union.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25515.
Date of creation: 2006
Date of revision:
agricultural prices; exchange rates; monetary shocks; overshooting; transition economy; Financial Economics; C32; E51; P22; Q11;
Other versions of this item:
- Bakucs, Lajos Zoltan & Bojnec, Stefan & Ferto, Imre, 2007. "Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy: The Case of Slovenia," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9422, European Association of Agricultural Economists.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996.
"Efficient Tests for an Autoregressive Unit Root,"
Econometric Society, vol. 64(4), pages 813-36, July.
- Tom Doan, . "ERSTEST: RATS procedure to perform Elliott-Rothenberg-Stock unit root tests," Statistical Software Components RTS00066, Boston College Department of Economics.
- Tom Doan, . "GLSDETREND: RATS procedure to perform local to unity GLS detrending," Statistical Software Components RTS00077, Boston College Department of Economics.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
- Jeffrey H. Dorfman & William D. Lastrapes, 1996. "The Dynamic Responses of Crop and Livestock Prices to Money-Supply Shocks: A Bayesian Analysis Using Long-Run Identifying Restrictions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 530-541.
- Shih-wen Hu & Vey Wang, 1996. "Commodity Price Dynamics and Anticipated Shocks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 982-990.
- Bordo, Michael David, 1980. "The Effects of Monetary Change on Relative Commodity Prices and the Role of Long-Term Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1088-1109, December.
- Sayed H. Saghaian & Michael R. Reed & Mary A. Marchant, 2002. "Monetary Impacts and Overshooting of Agricultural Prices in an Open Economy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 90-103.
- Peng, Xuehua & Marchant, Mary A. & Reed, Michael R., 2004. "Identifying Monetary Impacts On Food Prices In China: A Vec Model Approach," 2004 Annual meeting, August 1-4, Denver, CO 20315, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Nedka Ivanova & Philip Dawson & John Lingard, 2003. "Macroeconomic Impacts on Bulgarian Agriculture during Transition," Applied Economics, Taylor & Francis Journals, vol. 35(7), pages 817-823.
- Orden, David, 1986. "Agriculture, trade, and macroeconomics: The U.S. case," Journal of Policy Modeling, Elsevier, vol. 8(1), pages 27-51.
- Bakucs, Lajos Zoltan & Ferto, Imre, 2005. "Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24711, European Association of Agricultural Economists.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.