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Monetary Impacts and Overshooting of Agricultural Prices in a Transition Economy

  • Bakucs, Lajos Zoltan
  • Ferto, Imre

The paper focus on the time adjustment paths of the exchange rate and 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 prices overshoot in a transition economy. The empirical 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.

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File URL: http://purl.umn.edu/24711
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Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24711.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24711
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  1. Ardeni, Pier-Giorgio & Rausser, Gordon C., 1990. "Alternative subsidy reduction paths : the role of fiscal and monetary policy linkages," CUDARE Working Paper Series 566, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  2. J. S. Taylor & John Spriggs, 1989. "Effects of the Monetary Macro-economy on Canadian Agricultural Prices," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 278-89, May.
  3. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  4. 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.
  5. Grennes, Thomas & Lapp, John S., 1986. "Neutrality of inflation in the agricultural sector," Journal of International Money and Finance, Elsevier, vol. 5(2), pages 231-243, June.
  6. 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.
  7. 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.
  8. 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.
  9. Ardeni, Pier Giorgio & Freebairn, John, 2002. "The macroeconomics of agriculture," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 28, pages 1455-1485 Elsevier.
  10. Brooks, Karen & Nash, John, 2002. "The rural sector in transition economies," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 30, pages 1547-1592 Elsevier.
  11. 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.
  12. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  13. 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).
  14. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  15. Zanias, George P, 1998. "Inflation, Agricultural Prices and Economic Convergence in Greece," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(1), pages 19-29.
  16. 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.
  17. Orden, David, 1986. "Agriculture, trade, and macroeconomics: The U.S. case," Journal of Policy Modeling, Elsevier, vol. 8(1), pages 27-51.
  18. Scott Rozelle & Johan F.M. Swinnen, 2004. "Success and Failure of Reform: Insights from the Transition of Agriculture," Journal of Economic Literature, American Economic Association, vol. 42(2), pages 404-456, June.
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