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Effects of Macroeconomic Policies on Sectoral Prices

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  • Mundlak, Yair
  • Cavallo, Domingo
  • Domenech, Roberto

Abstract

The effect of macroeconomic policies on the relative prices of internationally traded and domestic goods has been the subject of extensive study. Analysis of the way in which these policies then affect prices at the sectoral level is complicated by the heterogeneity of sectoral productions: even the prices of single products usually are determined by both domestic and traded components. We present a framework which first traces the influence of macropolicy on the relative prices of exports, imports, and home goods. It then accounts for each sector's degree of "tradability," which is based on the importance of trade in sectoral income, and the influence of macroeconomic policy on sectoral prices. To illustrate the use of this approach, it is applied to a simulation of trade liberalization in Argentina. Our results suggest that economywide policies had substantial negative effects on both the real exchange rate and the incentive to agricultural exports. Copyright 1990 by Oxford University Press.

Suggested Citation

  • Mundlak, Yair & Cavallo, Domingo & Domenech, Roberto, 1990. "Effects of Macroeconomic Policies on Sectoral Prices," The World Bank Economic Review, World Bank, vol. 4(1), pages 55-79, January.
    • Handle: RePEc:oup:wbecrv:v:4:y:1990:i:1:p:55-79
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    Cited by:

    1. Christopher B. Barrett, 1999. "The effects of real exchange rate depreciation on stochastic producer prices in low‐income agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 20(3), pages 215-230, May.
    2. Oloukoï, Laurent & Amoussouga Gero, Fulbert & Acclassato, Dénis & Chabossou, F. Augustin, 2013. "Mesures De Politique Agricole Et Competitivite Interne De L’Agriculture Au Benin," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161622, African Association of Agricultural Economists (AAAE).
    3. Hassanain, Khalifa, 1997. "External shocks and the real exchange rate: a simulation model for Egypt," ISU General Staff Papers 1997010108000012989, Iowa State University, Department of Economics.
    4. Javier Gómez & José Darío Uribe & Hernando Vargas, 2002. "The Implementation Of Inflation Targeting In Colombia," Borradores de Economia 3603, Banco de la Republica.
    5. Javier Gómez & Juan Manuel Julio, 2003. "Transmission Mechanism and Inflation Targeting: The Case of Colombia's Desinflation," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 18(2), pages 109-133, December.
    6. Lopez, Ramon & Ali, Ridwan & Larsen, Bjorn, 1991. "How trade and economic policies affect agriculture : a framework for analysis applied to Tanzania and Malawi," Policy Research Working Paper Series 719, The World Bank.
    7. Javier Gómez & Juan Manuel Julio, 2001. "Transmission Mechanisms and Inflation Targeting: The Case of Colombia Disinflation," Borradores de Economia 168, Banco de la Republica de Colombia.

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