Modeling Phased Reduction of Distortionary Policies in the U.S. Wheat Market under Alternative Macroeconomic Environments

Throughout much of the developed world, macroeconomic policies afforded a unique period of macroeconomic stability in the two decades following World War II. As a result, concern regarding the macroeconomic linkages with food and agricultural systems largely disappeared. In the early 1970s, with the major changes in monetary policies and central bank behavior, macroeconomic linkages were once again recognized as prime factors complicating the performance of the agricultural and food systems. The roller coaster ride that agriculture experienced over the 1970s and 1980s has been significantly influenced by macroeconomic and international linkages (Rausser et al., 1966). Agriculture's prosperous condition in the 1970s was followed by a recession in the 1980s. This more recent history stands in sharp contrast to the basic stability of the 1950s and 1960s. It is also important to recall that this roller coaster experience of the 1970s and 1980s is not unprecedented. For example, the period from 1900 through 1950 is surprisingly similar to the 1970s; and the late 1920s through the 1930s have some basic characteristics of the 1980s.