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The effects of macroeconomic factors on South African agriculture

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  • Joseph Kargbo

Abstract

Significant research efforts have been devoted to understanding the effects of macroeconomic factors on the agriculture sector. Analysing the sources of volatility in the industry is critical for designing appropriate policies to stabilize agricultural markets, reduce poverty and increase economic growth. Agriculture is a competitive sector with prices that are more flexible than those in nonagricultural sectors. This article uses annual data over the 1957-2004 period and a vector error-correction model in investigating the dynamic effects of exchange rates, money supply and other macroeconomic variables on the agricultural sector in South Africa. Overall, real exchange rates, interest rates, inflation and money supply (M3) shocks have significant and persistent impacts on agricultural output, prices received by farmers and farm input prices. M3 and interest rate shocks tend to put agriculture in a cost-price squeeze. Agricultural price movements are a source of macroeconomic instability in the country. Real exchange rate shocks shift relative prices in favour of agriculture in the long-run, thereby, boosting farm incomes and accelerating poverty reduction in the country.

Suggested Citation

  • Joseph Kargbo, 2007. "The effects of macroeconomic factors on South African agriculture," Applied Economics, Taylor & Francis Journals, vol. 39(17), pages 2211-2230.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:17:p:2211-2230
    DOI: 10.1080/00036840600735374
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    References listed on IDEAS

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    1. Johannes Fedderke & Chandana Kularatne & Martine Mariotti, 2007. "Mark-up Pricing in South African Industry," Journal of African Economies, Centre for the Study of African Economies, vol. 16(1), pages 28-69, January.
    2. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    3. Janine Aron & John Muellbauer, 2000. "Inflation and output forecasts for South Africa: monetary transmission implications," CSAE Working Paper Series 2000-23, Centre for the Study of African Economies, University of Oxford.
    4. Kirsten, Johann F. & Vink, Nick & Scheepers, D. & Meyer, Ferdinand H. & Calcaterra, M. & Jenkins, Lindie, 2002. "The Political Economy Of Food Price Inflation In South Africa," Working Papers 18075, University of Pretoria, Department of Agricultural Economics, Extension and Rural Development.
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    1. Asharani Samal & Mallesh Ummalla & Phanindra Goyari, 2022. "The impact of macroeconomic factors on food price inflation: an evidence from India," Future Business Journal, Springer, vol. 8(1), pages 1-14, December.
    2. Maria Teresa Trentinaglia & Lucia Baldi & Massimo Peri, 2023. "Supporting agriculture in developing countries: new insights on the impact of official development assistance using a climate perspective," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 11(1), pages 1-23, December.
    3. Bahta, Y.T. & Lombard, W.A. & Jordaan, H., 2022. "The Effect Of Monetary Policy On Agricultural Production Of South Africa," 23rd Congress, Copenhagen, Denmark, 2022 345997, International Farm Management Association.
    4. Bahta, Y.T. & Lombard, W.A. & Jordaan, H., 2022. "The Effect Of Monetary Policy On Agricultural Production Of South Africa," Agricultural Economics Society (AES) 98th Annual Conference, The University of Edinburgh, Edinburgh, UK, March 18-20, 2024 345997, Agricultural Economics Society (AES).

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