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Macro policies and the food sector in Bangladesh

Author

Listed:
  • Fontana, Marzia
  • Wobst, Peter
  • Dorosh, Paul A.

Abstract

Trade liberalization in the early 1990s in Bangladesh has enabled the private sector to respond with market-stabilizing inflows of rice and wheat following major production shortfalls. At the same time, easing of restrictions on foreign investment, combined with substantial depreciation of the Taka, have enabled exports of the labor-intensive ready-made garment industry to expand significantly. Moreover, recently discovered natural gas resources might be exploited, creating new revenues for the country. A proper assessment of the impact of such policies and economic developments on the poor requires a comprehensive framework to analyze interactions between different sectors, and linkages between macro and micro levels. In this paper we develop a computable general equilibrium model (CGE) with special treatment of the rice and wheat sectors, and we use it to simulate the impact of (i) a decline in rice production due to floods, (ii) a cut in food aid of wheat, and (iii) increased revenues from the exploitation of natural gas resources. The results suggest that most households benefit from more liberalized rice and wheat trade, particularly after rice production shocks. Impacts of a decline in wheat food aid are relatively modest, as food aid imports are not large enough to have major macroeconomic effects. The simulations of natural gas export revenues suggest that the extent of disincentives to agriculture will depend on whether or not the resulting real exchange rate appreciation is sufficient to lower the import parity price of rice enough so that domestic prices are affected. Finally, all three simulations show that the effects of economic shocks on women's labor and female headed poor households can differ significantly from the effects on men's labor and other households.

Suggested Citation

  • Fontana, Marzia & Wobst, Peter & Dorosh, Paul A., 2001. "Macro policies and the food sector in Bangladesh," TMD discussion papers 73, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:tmddps:73
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    Citations

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    Cited by:

    1. Hoque, Serajul, 2008. "The macroeconomic, industrial and distributional effects of removing tariffs in Bangladesh," MPRA Paper 9577, University Library of Munich, Germany.
    2. Muhammad AFZAL & Maryam AYAZ, 2013. "Efficiency of Food Sector of Pakistan-A Dea Analysis," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(10), pages 1310-1330, October.
    3. Gelan, Ayele Ulfata, 2007. "Does food aid have disincentive effects on local production? A general equilibrium perspective on food aid in Ethiopia," Food Policy, Elsevier, vol. 32(4), pages 436-458, August.
    4. Arndt, Channing & Dorosh, Paul A. & Fontana, Marzia & Zohir, Sajjad & El-Said, Moataz & Lungren, Christen, 2002. "Opportunities and challenges in agriculture and garments," TMD discussion papers 107, International Food Policy Research Institute (IFPRI).
    5. Patrick Webb & Jennifer Coates & Robert Houser, 2002. "Does Microcredit Meet the Needs of all Poor Women? Constraints to Participation Among Desitute Women in Bangladesh," Working Papers in Food Policy and Nutrition 03, Friedman School of Nutrition Science and Policy.

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