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Abstract

The interaction between macroeconomic and trade issues and agriculture is not well understood. In sub-Saharan Africa, this relation becomes critical in recent structural adjustment programmes, especially in countries where agriculture is the mainstay of the economy. This paper examines empirically examples of a non-liberalized economy and a gradually liberalizing economy in the region. It demonstrates that a sufficiently monolithic and inefficient agricultural marketing structure results in the slow transmission of foreign exchange gains to farm gate prices that constrain potential supply response. Monetary policy impacts seem to be a function of greater macroeconomic liberalization than non-liberalization, especially when, in the latter case, domestic currencies are pegged directly to foreign currencies.

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