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The Transmission of Exchange Rate Changes to Agricultural Prices

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  • Liefert, William M.
  • Persuad, Suresh

Abstract

Movements in countries’ exchange rates can substantially change the prices of goods faced by producers and consumers and thereby affect incentives to produce, consume, and trade goods. Exchange rate changes, however, might not be completely transmitted (passed through) to domestic prices. Empirical evidence shows that price and exchange rate transmission for agricultural products is low in most developing economies, partly because of trade policies but also because of inadequate infrastructure and other market deficiencies. During the last 20 years, developed and developing countries generally have moved away from support policies that impede price and exchange rate transmission toward trade policies that allow transmission, such as tariffs. The Uruguay Round Agreement on Agriculture of 1994 strongly encouraged this development. Despite these policy changes, market deficiencies remain as a cause of incomplete transmission. Incomplete transmission weakens countries’ integration into world agricultural markets and thereby reduces agricultural trade potential. Low transmission in developing countries also decreases their own benefits from trade, including the gains they could realize if there is further global agricultural liberalization.

Suggested Citation

  • Liefert, William M. & Persuad, Suresh, 2009. "The Transmission of Exchange Rate Changes to Agricultural Prices," Economic Research Report 55942, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:55942
    DOI: 10.22004/ag.econ.55942
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    Cited by:

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    2. Iqbal, Md Zabid & Babcock, Bruce A., 2016. "Transmission of Global Commodity Prices to Domestic Producer Prices: A Comprehensive Analysis," ISU General Staff Papers 201601010800001020, Iowa State University, Department of Economics.
    3. Judith Hillen & Stephan von Cramon‐Taubadel, 2019. "Protecting the Swiss milk market from foreign price shocks: Public border protection vs. quality differentiation," Agribusiness, John Wiley & Sons, Ltd., vol. 35(4), pages 516-536, October.
    4. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00630711, HAL.
    5. Liefert, William M. & Liefert, Olga, 2007. "Distortions to Agricultural Incentives in Russia," Agricultural Distortions Working Paper Series 48386, World Bank.
    6. Amikuzuno, Joseph & Ogundari, Kolawole, 2013. "Price transmission Analysis and Associated Policy in Sub-Saharan Africa’s Agricultural Markets: What Does the Literature Say?," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 160479, African Association of Agricultural Economists (AAAE).
    7. Siami-Namini, Sima & Hudson, Darren, 2017. "Volatility Spillover Between Oil Prices, Us Dollar Exchange Rates And International Agricultural Commodities Prices," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252845, Southern Agricultural Economics Association.
    8. Nzuma, Jonathan Makau & Kirui, Patrick Kipruto, 2021. "Transmission of global wheat prices to domestic markets in Kenya: A cointegration approach," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 16(1), March.
    9. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Working Papers hal-00630711, HAL.
    10. Amikuzuno, Joseph & Ogundari, Kolawole, 2012. "The Contribution of Agricultural Economics to Price transmission Analysis and Market Policy in Sub-Sahara Africa: What Does the Literature Say?," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134754, Agricultural Economics Society.
    11. Nazif Durmaz, 2014. "Inventories of Asian Textile Producers, US Cotton Exports, and the Exchange Rate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 397-413, September.
    12. Zeng, Wendy S. & Johnson, William A., 2023. "Inflation and Trade Deficits in Agriculture and the General Economy: The Role (or Lack Thereof) of Exchange Rate Fluctuations," 2023 Annual Meeting, July 23-25, Washington D.C. 335683, Agricultural and Applied Economics Association.
    13. Hillen, J., 2018. "Protecting the Swiss milk market from foreign price shocks: Public border protection vs. quality differentiation," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276015, International Association of Agricultural Economists.
    14. Kanieski da Silva, Bruno & Schons, Stella Z. & Cubbage, Frederick W. & Parajuli, Rajan, 2020. "Spatial and cross-product price linkages in the Brazilian pine timber markets," Forest Policy and Economics, Elsevier, vol. 117(C).

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    Agribusiness; Agricultural and Food Policy; Agricultural Finance; Financial Economics;
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