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The Effects Of Real Exchange Rate Depreciation On Stochastic Producer Prices In Low Income Agriculture

  • Barrett, Christopher B.

This paper considers the effects of real exchange rate depreciation on stochastic agricultural producer prices in low-income agriculture. Conventional wisdom, that real depreciation achieved through nominal currency devaluation stimulates tradables production, does not universally hold in the presence of stochastic prices. In fact, real depreciation is only stimulative in two cases - importables that remain importable and nontradables that become exportable. GARCH estimation of time-series price data on several commodities from Madagascar support the hypotheses generated by the analytical model. © 1999 Elsevier Science B.V. All rights reserved.

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File URL: http://purl.umn.edu/28365
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Paper provided by Utah State University, Economics Department in its series Economics Research Institute, ERI Study Papers with number 28365.

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Date of creation: 1998
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Handle: RePEc:ags:usuesp:28365
Contact details of provider: Web page: http://www.econ.usu.edu/
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  1. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
  2. Balassa, Bela, 1990. "Incentive policies and export performance in sub-Saharan Africa," World Development, Elsevier, vol. 18(3), pages 383-391, March.
  3. Stanley Fischer, 1981. "Relative Shocks, Relative Price Variability, and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 381-442.
  4. Barrett, Christopher B., 1998. "Immiserized growth in liberalized agriculture," World Development, Elsevier, vol. 26(5), pages 743-753, May.
  5. Barrett, Christopher B., 1996. "On price risk and the inverse farm size-productivity relationship," Journal of Development Economics, Elsevier, vol. 51(2), pages 193-215, December.
  6. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  7. 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.
  8. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
  9. Kyle, Steven, 1992. "Pitfalls in the measurement of real exchange rate effects on agriculture," World Development, Elsevier, vol. 20(7), pages 1009-1019, July.
  10. Chavas, Jean-Paul, 1988. "On competitive speculation under uncertainty: An alternative view of the inverse-carrying charge," Journal of Economics and Business, Elsevier, vol. 40(2), pages 117-128, May.
  11. Elbadawi, Ibrahim A., 1992. "Real overvaluation, terms of trade shocks, and the cost to agriculture in sub-Saharan Africa," Policy Research Working Paper Series 831, The World Bank.
  12. Delgado, Christopher L, 1992. "Why Domestic Food Prices Matter to Growth Strategy in Semi-open West African Agriculture," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 1(3), pages 446-71, November.
  13. Mundlak, Yair & Cavallo, Domingo & Domenech, Roberto, 1990. "Effects of Macroeconomic Policies on Sectoral Prices," World Bank Economic Review, World Bank Group, vol. 4(1), pages 55-79, January.
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