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Monetary Shocks and Real Farm Prices: A Re-Examination

Author

Listed:
  • Alan G. Isaac

    (American University)

  • David E. Rapach

    (American University)

Abstract

The effect of monetary policy on the farm sector remains controversial. Studies attempting to quantify the effects of monetary disturbances on real farm prices report conflicting results: some find that positive monetary shocks increase real farm prices in the short run, while others detect no such effect. We offer a resolution of these conflicting findings by re-estimating existing models on a common data set. When sample periods corresponding to the original studies are used, the conflicting results are confirmed. In contrast, when samples are updated through 1993, all models supply the same result: monetary shocks do not afffect real farm prices.

Suggested Citation

  • Alan G. Isaac & David E. Rapach, 1996. "Monetary Shocks and Real Farm Prices: A Re-Examination," Others 9602001, EconWPA.
  • Handle: RePEc:wpa:wuwpot:9602001
    Note: Type of Document - Word Perfect 6.1; prepared on IBM PC; to print on HP Laserjet; pages: 28; figures: included. none
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    References listed on IDEAS

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    1. Runkle, David E, 1987. "Vector Autoregressions and Reality," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 437-442, October.
    2. Devadoss, Stephen & Meyers, William H., 1987. "Relative Prices and Money: Further Results for the United States," Staff General Research Papers Archive 10856, Iowa State University, Department of Economics.
    3. John S. Lapp, 1990. "Relative Agricultural Prices and Monetary Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 622-630.
    4. Barro, Robert J., 1976. "Rational expectations and the role of monetary policy," Journal of Monetary Economics, Elsevier, vol. 2(1), pages 1-32, January.
    5. David E. Runkle, 1987. "Vector autoregressions and reality," Staff Report 107, Federal Reserve Bank of Minneapolis.
    6. S. Devadoss & William H. Meyers, 1987. "Relative Prices and Money: Further Results for the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 838-842.
    7. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    8. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    9. Michael T. Belongia, 1991. "Monetary policy and the farm/nonfarm price ratio: a comparison of effects," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 30-46.
    10. Robert G. Chambers, 1984. "Agricultural and Financial Market Interdependence in the Short Run," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(1), pages 12-24.
    11. Jeffrey A. Frankel, 1986. "Expectations and Commodity Price Dynamics: The Overshooting Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 344-348.
    12. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
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    Citations

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    Cited by:

    1. Lai, Ching-Chong & Hu, Shih-Wen & Fan, Chih-Ping, 2005. "The Overshooting Hypothesis of Agricultural Prices: The Role of Asset Substitutability," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(01), April.
    2. Goodness C. AYE & Rangan GUPTA, 2012. "The Effects Of Monetary Policy On Real Farm Prices In South Africa," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 12(1), pages 147-158.
    3. Apergis, Nicholas & Rezitis, Anthony, 2011. "Food Price Volatility and Macroeconomic Factors: Evidence from GARCH and GARCH-X Estimates," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(01), pages 95-110, February.
    4. Arnade, Carlos Anthony & Osborne, Stefan, 2001. "Measurement And Testing For Neutrality Of Foreign Price And Cpi Transmission In Russia," 2001 Annual meeting, August 5-8, Chicago, IL 20625, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Kevin L. Kliesen & William Poole, 2000. "Agriculture outcomes and monetary policy actions: Kissin' cousins?," Review, Federal Reserve Bank of St. Louis, issue May, pages 1-12.

    More about this item

    Keywords

    monetary shocks farm prices;

    JEL classification:

    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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