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Real overvaluation, terms of trade shocks, and the cost to agriculture in sub-Saharan Africa

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  • Elbadawi, Ibrahim A.
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    Abstract

    Starting from the premise that agriculture should be pivotal in the structural transformation and economic development of sub - Saharan Africa, the author addresses two related issues. First, the extent to which policy induced distortions influence the structure of incentives for agriculture (with direct distortions induced by policies aimed directly at agriculture distinguished from indirect policies aimed at the economy's macroeconomic management). The second issue is how these distortions affect agriculture's growth, given other growth fundamentals. Preliminary analysis of evidence in sub - Saharan Africa links the observed declines in agriculture and the general worsening of economic conditions to economic distortions. A more rigorous analysis, using data from the Sudan, an African country with a sizable agricultural economy, strongly supports the predictions of an endogenous growth model, which states the deleterious effects of economic distortions on growth.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 831.

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    Date of creation: 31 Jan 1992
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    Handle: RePEc:wbk:wbrwps:831

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    Related research

    Keywords: Environmental Economics&Policies; Economic Stabilization; Achieving Shared Growth; Macroeconomic Management; Economic Theory&Research;

    References

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    1. Cuddington, John T. & Winters, L. Alan, 1987. "The Beveridge-Nelson decomposition of economic time series : A quick computational method," Journal of Monetary Economics, Elsevier, vol. 19(1), pages 125-127, January.
    2. Tshibaka, Tshikala B., 1986. "The effects of trade and exchange rate policies on agriculture in Zaire:," Research reports 56, International Food Policy Research Institute (IFPRI).
    3. Ghura, Dhaneshwar & Grennes, Thomas J., 1991. "The Impact of Real Exchange Rate Misalignment and Instability on Macroeconomic Performance in Sub-Saharan Africa," Working Papers 51146, International Agricultural Trade Research Consortium.
    4. Elbadawi, I.A., 1989. "Terms Of Trade, Commercial Policy, And The Black Market For Foreign Exchange: An Empirical Model Of Real Exchange Rate Determination," Papers 570, Yale - Economic Growth Center.
    5. Cuddington, John T. & Urzua, Carlos M., 1989. "Trends and cycles in Colombia's real GDP and fiscal deficit," Journal of Development Economics, Elsevier, vol. 30(2), pages 325-343, April.
    6. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
    7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
    8. Neary, Peter, 1988. "Determinants of the Equilibrium Real Exchange Rate," American Economic Review, American Economic Association, vol. 78(1), pages 210-15, March.
    9. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, vol. 2(3), pages 255-71, September.
    10. Lizondo, Jose Saul, 1989. "Overvalued and undervalued exchange rates in an equilibrium optimizing model," Policy Research Working Paper Series 223, The World Bank.
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    Cited by:
    1. Elbadawi, Ibrahim A. & Ghura, Dhaneshwar & Uwujaren, Gilbert, 1992. "World Bank adjustment lending and economic performance in sub-Saharan Africa in the 1980s : a comparison with other low income countries," Policy Research Working Paper Series 1000, The World Bank.
    2. Barrett, Christopher B., 1999. "The effects of real exchange rate depreciation on stochastic producer prices in low-income agriculture," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 20(3), May.
    3. Ndlela, Thandinkosi, 2010. "Implications of real exchange rate misalignment in developing countries: theory, empirical evidence and application to growth performance in Zimbabwe," MPRA Paper 32710, University Library of Munich, Germany.

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