Foreign exchange rate policy implications on competitiveness in agriculture

Farkasné Fekete, Mária – Sági, Judit

Keywords: monetary policy, foreign exchange rate, parity

By this study we follow the discussion initiated by prof. Magda in his article “Exchange rate policy and the agriculture”, also reflecting to Lakner-Podrudzsik “Does the depreciation of the forint mean a medicine or a placebo?”

We argue that the real effective exchange rate – in case of small and open economies, especially in the medium term – basically determines the competitiveness of the economy as a whole, and the agriculture, as a part. In this paper we analyse the effects of the forint exchange rate divergence from the equilibrium exchange rate and its volatility, in relation to the specifications of the agricultural sector with possibilities to accommodate. In this sense we correspond to prof. Csáki, saying that recent appreciation of the forint has clarified the insufficient competitiveness and weak effectiveness of the Hungarian agriculture.

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