Agricultural Productivity, The Real Effective Exchange Rate, And Structural Change: Some Evidence From Africa
agriculture, real exchange rate depreciation, structural change
Review of Development Economics
Agriculture is thought to play a number of roles in the early development process. All of these roles involve fostering non-agricultural development, in particular manufacturing. It is argued in this paper that agriculture plays a role that has hitherto been ignored. Specifically, if agricultural labor productivity increases faster than manufacturing labor productivity, the real effective exchange rate will depreciate. This depreciation of real effective exchange rate occurs because in very poor countries agriculture makes up the dominant share of both GDP and employment. The depreciation also makes it easier for a country to expand the production of tradables relative to nontradables, with manufacturing being the main tradable. This proposition, which as agricultural labor productivity increases relative to manufacturing labor productivity the real effective exchange rate depreciates, is tested using data drawn from 10 sub-Saharan African countries.
Original Publication Date
DOI of published version
UNI ScholarWorks, Rod Library, University of Northern Iowa
Grabowski, Richard and Self, Sharmistha, "Agricultural Productivity, The Real Effective Exchange Rate, And Structural Change: Some Evidence From Africa" (2020). Faculty Publications. 352.