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Decomposing Changes in Agricultural Producer Prices

Authors

  • William M. Liefert

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    • William M. Liefert is a Senior Agricultural Economist with the Economic Research Service of the US Department of Agriculture, Room 5079, 1800 M St, NW, Washington, DC 20036-5831, USA. E-mail: wliefert@ers.usda.gov for correspondence. The author thanks Carlos Arnade, Stephan von Cramon-Taubadel, Olga Liefert, Mary Anne Normile, Mathew Shane, Johan Swinnen, Peter Walkenhorst, and two anonymous referees for helpful comments, and is responsible for any remaining errors. The views expressed in this article are the author’s alone, and may not be attributed to the Economic Research Service or US Department of Agriculture.


Abstract

This article develops a method for decomposing changes in agricultural producer prices. The method builds on a procedure used by the World Bank, with the main variables in the decomposition being trade prices, exchange rates and trade policies. We expand on the World Bank decomposition procedure by broadening the analysis of policy effects, adding the effect from incomplete transmission of changes in trade prices and exchange rates to producer prices, and handling the effect on prices from interactions between variables as they change simultaneously. Decomposition results are presented for various commodities for the major emerging markets of Brazil, China and South Africa.

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