Exchange Rate Misalignment and Its Effects on Agricultural Producer Support Estimates (PSEs) in India
This paper examines the effects of the exchange rate misalignment on the agricultural Producer Support Estimates (PSEs) in India. Based on various time series techniques, the equilibrium exchange rate of the Indian rupee and the corresponding misalignment are estimated and applied to the calculations of the PSEs. Our results show that the indirect effect from exchange rate misalignment on India's agriculture has either amplified or counteracted the direct effect from sectoral-specific policies. The indirect effect of exchange rate overvaluation has potentially taxed the agricultural sector in India during the periods leading up to the financial crisis. However, the magnitude of these indirect effects becomes smaller in the later periods when the actual exchange rate moves closer to its equilibrium value.
|Date of creation:||2006|
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- Valerie Cerra & Sweta Chaman Saxena, 2002. "What Caused the 1991 Currency Crisis in India?," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 5.
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- Sweta Chaman Saxena & Valerie Cerra, 2000. "What Caused the 1991 Currency Crisis in India?," IMF Working Papers 00/157, International Monetary Fund.
- Matthew Harley, 1996. "Use of the Producer Subsidy Equivalent as a Measure of Support to Agriculture in Transition Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 799-804.
- Mullen, Kathleen & Orden, David & Gulati, Ashok, 2005. "Agricultural policies in India," MTID discussion papers 82, International Food Policy Research Institute (IFPRI).
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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