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Monetary policy shocks and delayed overshooting in farm prices and exchange rates

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  • Kim, Jihae
  • Kim, Soyoung

Abstract

This study empirically investigated the effects of monetary policy shocks on farm prices and exchange rates by using vector auto-regression models with sign restrictions on impulse responses. The main empirical results are as follows. First, contractionary monetary policy shocks have significant negative effects on real farm prices, which suggests that farm prices respond more to monetary policy shocks than to the general price level. Second, the effects of monetary policy shocks on farm prices are stronger than the effects of monetary policy shocks on exchange rates. Third, farm price dynamics under monetary policy shocks show “delayed overshooting” as exchange rate dynamics do.

Suggested Citation

  • Kim, Jihae & Kim, Soyoung, 2021. "Monetary policy shocks and delayed overshooting in farm prices and exchange rates," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 620-628.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:620-628
    DOI: 10.1016/j.iref.2020.09.025
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    Cited by:

    1. Jiawu Dai & Liurui Deng & Lan Yang, 2021. "Testing the absorber hypothesis of exchange rates for the overshooting of agricultural prices in China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 67(8), pages 327-336.

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    More about this item

    Keywords

    VAR; Monetary policy shocks; Exchange rates; Farm prices; Sign restrictions; Overshooting;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • F3 - International Economics - - International Finance

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