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Agriculture and the macroeconomy


  • Schiff, Maurice*Valdes, Alberto


Based on an economy-wide perspective, this paper begins with a discussion of the bias against exports and agriculture that characterized the economic literature and the development strategies in many developing countries after World War II. This is followed by an analysis of how the macroeconomic environment affects agricultural structural price incentives. Specifically, the paper discusses how early policies concerning industrial protection, exchange rates, and interest rates and other fiscal policies can strongly influence the economic incentives for agriculture compared with other sectors, identifying the most relevant literature and alternative approaches used on this issue. It then proceeds to examine how the real exchange rate can be affected by exogenous shocks, such as the foreign terms of trade, with emphases on the Dutch Disease phenomenon and agriculture. The paper next examines the influence of interest rates on incentives in agriculture, arguing that, surprisingly, this has been a neglected area in the literature. The paper explores the effects on agriculture of structural adjustment programs implemented since the early 1980s in developing countries. The final section surveys the literature on agriculture and the macro-economy in industrial countries, focusing on the impact of the exchange rate on export competitiveness in the United States, the cost of agricultural protection for the overall economy in Europe and Japan, and the increased importance of fluctuations in money markets for the farm sector and the additional instability they generate

Suggested Citation

  • Schiff, Maurice*Valdes, Alberto, 1998. "Agriculture and the macroeconomy," Policy Research Working Paper Series 1967, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1967

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    References listed on IDEAS

    1. Dorosh, Paul & Valdés, Alberto, 1990. "Effects of exchange rate and trade policies on agriculture in Pakistan:," Research reports 84, International Food Policy Research Institute (IFPRI).
    2. Bela Balassa, 1965. "Tariff Protection in Industrial Countries: An Evaluation," Journal of Political Economy, University of Chicago Press, vol. 73, pages 573-573.
    3. Ralph G. Lattimore & G. Edward Schuh, 1979. "Endogenous Policy Determination: the Case of the Brazilian Beef Sector," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 27(2), pages 1-16, July.
    4. 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 255-271, September.
    5. W. E. G. Salter, 1959. "Internal And External Balance: The Role Op Price And Expenditure Effects," The Economic Record, The Economic Society of Australia, vol. 35(71), pages 226-238, August.
    6. T. W.Swan, 1960. "Economic Control In A Dependent Economy," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 51-66, March.
    7. Martin, Will & Warr, Peter G, 1993. "Explaining the Relative Decline of Agriculture: A Supply-Side Analysis for Indonesia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 381-401, September.
    8. Amin, A.A., 1996. "The Effects of Exchange Rate Policy on Cameroon's Agricultural Competitiveness," Papers 42, African Economic Research Consortium.
    9. A. Valdés, 1994. "Agricultural Reforms In Chile And New Zealand: A Review," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(2), pages 189-201.
    10. Panagariya, Arvind & Schiff, Maurice, 1991. "Taxes versus quotas : the case of cocoa exports," Policy Research Working Paper Series 756, The World Bank.
    11. Kyle, Steven, 1992. "Pitfalls in the measurement of real exchange rate effects on agriculture," World Development, Elsevier, vol. 20(7), pages 1009-1019, July.
    12. Mundlak, Yair, 1997. "The Dynamics of Agriculture," 1997 Conference, August 10-16, 1997, Sacramento, California 197028, International Association of Agricultural Economists.
    13. G. Edward Schuh, 1974. "The Exchange Rate and U. S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 1-13.
    14. 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.
    15. Jagdish N. Bhagwati, 1978. "Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1.
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    Cited by:

    1. David, Cristina C., 1997. "Agricultural policy and the WTO Agreement: The Philippine Case," Discussion Papers DP 1997-13, Philippine Institute for Development Studies.
    2. Bathla, Seema, 2012. "Volatility in Agriculture Commodity Prices in India: Impact and Macroeconomic and Sector-Specific Policy Responses," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122543, European Association of Agricultural Economists.
    3. François Joseph Cabral, 2008. "Insécurité alimentaire en milieu urbain et rural au Sénégal : les mêmes causes créent-elles les mêmes effets ?," Cahiers de recherche 08-12, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    4. Fynn, John & Haggblade, Steven, 2006. "Potential Impact of the Kwacha Appreciation and Proposed Tax Provisions of the 2006 Budget Act on Zambian Agriculture," Food Security Collaborative Working Papers 54475, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    5. Richard Tiffin & Xavier Irz, 2006. "Is agriculture the engine of growth?," Agricultural Economics, International Association of Agricultural Economists, vol. 35(1), pages 79-89, July.
    6. World Bank, 2005. "Agriculture and Achieving the Millennium Development Goals," World Bank Other Operational Studies 8455, The World Bank.
    7. Gerpacio, Roberta V. & Pingali, Prabhu L., 2007. "Tropical and Subtropical Maize in Asia: Production Systems, Constraints, and Research Priorities," Maize Production Systems Papers 56107, CIMMYT: International Maize and Wheat Improvement Center.
    8. Oloukoï, Laurent & Amoussouga Gero, Fulbert & Acclassato, Dénis & Chabossou, F. Augustin, 2013. "Dynamique De La Competitivite Externe De L’Agriculture Au Benin : Analyse Par Une Approche Dynamique Synthetique," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161621, African Association of Agricultural Economists (AAAE).
    9. David, Cristina C., 1999. "Constraints to Food Security: The Philippine Case," Discussion Papers DP 1999-31, Philippine Institute for Development Studies.
    10. Shifa, Abdulaziz, 2011. "The Dual Policy in the Dual Economy - The Political Economy of Urban Bias in Dictatorial Regimes," Research Papers in Economics 2011:22, Stockholm University, Department of Economics.
    11. David, Cristina C., 1998. "Towards an Efficient Path to Food Security: The Philippine Case," Discussion Papers DP 1998-39, Philippine Institute for Development Studies.
    12. Hewitt, Joanna, 2008. "Impact evaluation of research by the International Food Policy Research Institute on agricultural trade liberalization, developing countries, and WTO's Doha negotiations:," Impact assessments 28, International Food Policy Research Institute (IFPRI).
    13. Bathla, Seema, 2011. "Resilience of Indian agriculture to external shocks: Analyzing through a structural econometric model," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 14, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).


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