Currency exchange policy and agrarian economics

Magda, Sándor

Data and facts described in this study suggest, that the more significant negative effects of over-valued and still strengthening HUF on agrarian economics are the following:
- Surplus produce accumulating due to decreased export competitiveness causes prices to decline on home markets
- The advantages of cheaper imports are not shared by the entire agricultural sector, but only by a few members of the market (some specialist sections of the food industry, fodder blenders), therefore farmers do not benefit from the cost cutting effects of strengthening HUF.
- Recently emerging competition with imports on internal food markets causes prices to decline, which weakens the income producing capability of home farmers
- Produce prices under the present market conditions are declining, and so is the income position of producers.

In addition to these arguments it should be emphasized that earlier methods to alleviate the negative effects of currency exchange rates on the farming sector can no longer be applied due to our EU membership.

It is important to emphasize that, Hungarian experts of farm and food economics do not involve themselves in monetary policies purely in the interest of the farming sector. A currency exchange rate policy better adjusted to reality serves the interest of the entire national economy, because an over-valued national currency encourages imports and limits competitive exports, therefore aggravates the country’s balance of payment. On the other hand, a currency exchange rate policy in harmony with the country’s monetary situation creates realistic conditions of competition for home entrepreneurs, enhancing market competitiveness thereby encouraging exports, moderating interests in imports and improving the county’s balance of payment.

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