Agriculture Reference
In-Depth Information
Because the reforms cause the most substantal reductons n
protection of China's food processing sector, and therefore lead to long-run
contractions in rice and 'other crops' production, they require substantial
structural change, including the relocation of employment from agriculture
to manufacturing. In the long run, employment in food processing falls by
7 per cent, in rice production by 4 per cent, and in 'other crops' by 2 per
cent. As simulated, in the long run, the workers lost from these sectors
are re-employed in the energy, manufacturing, and transport and other
servces sectors.
Simulated short-run effects of trade policy reforms
In the short run, the model used has smaller elasticities of consumption
and production. For all the regions represented, the 'standard' closure is
as indicated in Table A9.7. Monetary authorities in China and Vietnam are
assumed to maintain effective fixed exchange rates against the US$. The
other regions identified adopt inflation or CPI targeting. Capital controls are
assumed rigid in China and Vietnam, but they are non-existent in the other
regions. In the labour markets of China and Vietnam, nominal wages are
assumed to be 'sticky'. Full short-run rigidity is assumed in the industrial
countries, while nominal wages are assumed to be fully flexible elsewhere
in Asia and the developing world. As to fiscal policies (not shown in the
table) government spending in all regions is assumed to absorb a fixed
proportion of GDP and the rates of direct and indirect tax are constant,
so that government deficits vary in response to shocks. Henceforth, this
closure s only vared n order to nvestgate the senstvty of the effects
of trade reforms to the macroeconomc polcy envronment.
Sx macroeconomc regmes were smulated
The 'standard' closure, with rigid capital controls, a fixed exchange
rate and fixed direct and indirect tax rates
Capital controls and fixed tax rates, monetary policy targets the CPI,
and the exchange rate floats.
The 'standard' closure except that captal controls are removed
Closure 2 (floating exchange rate), except that capital controls are
removed.
•
•
•
•
