does it matter how monetary policy is implemented abstract in the u s existing monetary base measures add an adjustment factor for changes in reserve requirement ratios to high powered money implicitly the monetary base assumes that the economic effects of changes in reserve requirements are identical to those due to changes in high powered money theory however does not generally support the prediction that the two policy tools will have the same economic effects structural vars are estimated to compare the short run paths of inflation and output growth under two different types of policy shocks in doing so this analysis gives one a measure of the costs associated with this implicit equivalence assumption the evidence is consistent with the hypothesis that the federal reserve at least partially offsets reserve requirement changes with open market operations and the hypothesis that dynamic explanations of macroeconomic variables are improved by separating reserve requirement changes from other monetary policy moves

the information value of the fomc policy directive under the new operating procedures the federal reserve s federal open market committee fomc meets every one to two months to determine its monetary policy objectives over the near term at the conclusion of each meeting the fomc issues a policy directive to the system s account manager at the new york federal reserve bank specifying short run money growth targets and a federal funds interest rate tolerance range the policy directive is not disclosed to the public until after the next meeting when a new directive becomes effective in an earlier paper o brien 1981 evidence was presented suggesting that immediate disclosure of the fomc policy directives over the period january 1976 june 1979 would have improved the accuracy of market expectations of near term interest rate levels by no more than minor amounts in this paper we examine the information value of the fomc policy directives in predicting near term levels of interest rates urder the federal reserve s revised operating procedures adopted in late october 1979 but modified in late 1982 in the next section the interest rate information value of the fomc policy directive is discussed in terms of a simple money demand and supply model

a note on discount rate policy and the variability of discount window borrowing abstract the purpose of this note is to evaluate the appropriate discount rate policy rules consistent with minimization of the variability of borrowing at the federal reserve discount window in the context of goodfriend s 1983 model of the bank borrowing decision it is demonstrated that either a penalty rate or a subsidy rate policy will produce minimized variability of borrowing so long as the subsidy rate adjusts point for point to changes in the value of the federal funds rate these policy rules are compatible with a policy procedure designed to target borrowed or non borrowed reserves if the fed does not adhere to one of these specific rules minimization of borrowing variability requires an open market procedure in which the fed pegs the federal funds rate

a note on interest on required reserves as an instrument of monetary control abstract the purpose of this paper is to evaluate the potential role of interest on required reserves as a monetary control instrument it is found that an increase in the interest rate paid on reserves held at the federal reserve has counteracting effects on the variability of the money stock hence there is an optimal setting for the interest rate on required reserves that theoretically may include or lie anywhere between the extreme cases of no interest payment and the payment of interest at the maximum feasible level

the federal reserve s new operating procedures a post mortem abstract although money stock targeting has been the strategic focus of federal reserve policy since the mid 1970 s operating policy the tactics whereby the longer run strategy is implemented over short term intervals has been changed by the federal reserve at least twice over this period a particularly dramatic change in operating policy was announced by the federal reserve in october 1979 this paper provides empirical evidence that settles questions about the nature of this change and suggests that the new operating procedures may have contributed to the heightened interest rate volatility experienced over the 1979 to 1982 period

u s treasury bill forward and futures prices for the period 1976 87 forward rates on u s t bills averaged more than 30 basis points above the comparable futures market rates since risk is common to both rates i argue that this difference can be explained by the substitutability of different maturity t bills for money consistent with this hypothesis i find that this difference depends positively on interest rates and the spread between the federal funds and 3 month t bill rates and negatively on the ratio of short term governments to broadly defined money also significant shifts occurred in the relationship in october 1979 and august 1982 coinciding with changes in federal reserve operating procedures copyright 1994 by ohio state university press

government fertilizer subsidy and commercial sector fertilizer demand evidence from the federal market stabilization program fmsp in nigeria abstract we examine how the previous fertilizer subsidy program in nigeria fmsp affected the demand for commercial fertilizer we apply an endogenous double hurdle model to a pseudo panel and cross section data of farm households the methodology accounts for potential endogeneity of commercial fertilizer price with subsidy our specification is also appropriate where few farmers report the use of both subsidized and commercial fertilizer we find that 100 kg of subsidized fertilizer supplied to a farm household reduced the probability of its participation into commercial fertilizer market by 10 21 points while not affecting fertilizer use upon participation

agriculture in africa telling myths from facts a synthesis stylized facts drive research agendas and policy debates yet robust stylized facts are hard to come by and when available often outdated in a special issue of food policy 12 papers revisit conventional wisdom on african agriculture and its farmers livelihoods using nationally representative surveys from the living standards measurement study integrated surveys on agriculture initiative in six african countries at times the findings simply confirm the common understanding of the topic but the studies also throw up several surprises redirecting some policy debates while fine tuning others overall the project calls for more attention to checking and updating the common wisdom this requires nationally representative data and sufficient incentives among researchers and policy makers alike without well grounded stylized facts they can easily be profoundly misguided

federal reserve operating procedures a survey and evaluation of the historical record since october 1979 comment william poole has produced another thoughtful and thought provoking paper two major conclusions emerge from his work first the instability of growth in m1b since october 1979 can be attributed largely to a reluctance by the federal reserve to permit wide enough swings in the federal funds rate second to correct this problem and to promote greater stability in financial markets and the economy the fed ought to replace lagged with contemporaneous reserve accounting and reform the discount window they should then begin to hit a nonborrowed base or reserves target that grows at a steady rate i will organize my comments around these two conclusions i will not comment directly on the other excellent paper in this session by ralph c bryant i will refer to some of bryant s empirical work though in my discussion of the poole paper poole attributes the continued extensive volatility of m1b growth since october 1979 to efforts by the federal reserve to smooth interest rates he concedes that the fed really has let go the federal funds rate to a very considerable extent but he believes that variability in m1b growth over tonger periods is due primarily to the important role accorded interest rates in federal reserve policy making italics mine he cites four reasons for believing that the post october 1979 targeting procedures qualitatively are not very different from the federal funds targeting procedure followed earlier of the four the most interesting and empirically verifiable is that in nearly one third of the weeks since october 1979 the federal funds rate has averaged within 100 basis points of either the bottom or the top of the widened target range during these weeks the constraint on the funds rate might have prevented the fed from hitting its nonborrowed reserves target poole in fact accepts this view uncritically

rural nonfarm activities and agricultural crop production in nigeria although most rural households are involved in the farm sector the nonfarm sector has grown significantly in recent decades and its role in rural development has become increasingly important this article examines the effect of participation in nonfarm activities on crop expenses of farm households in nigeria the relationship is modeled using a nonseparable agricultural household model that suggests that participating in nonfarm activities can relax the credit constraints facing farm households and reduce risk thereby helping households improve farm production and smooth consumption over time the results show that participation in nonfarm activities by nigerian farmers has a positive and significant effect on crop expenses and in particular on payments for hired labor and inorganic fertilizers separate analysis of the six geopolitical zones in nigeria indicates that it is in the south south and south east zones where nonfarm participation appears to induce more hiring of labor the results support the hypothesis that nonfarm participation helps relax liquidity constraints but suggests how that liquidity is used is zone specific in general the results also indicate that liquidity is used more to pay for inputs into staple production as opposed to cash crops

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

farm productivity in burkina faso effects of animal traction and nonfarm income the purpose of this invited paper is to stimulate at the micro meso and macro levels debate on positive analytical approaches to agricultural productivity the session focuses on africa because it is the only developing region where crop output and yield growth is lagging seriously behind population growth the present paper treats the micro farmhousehold level macro and meso analyses are useful for tracing productivity effects of policy and infrastructure change employing broad samples over long periods micro analyses tend to track smaller samples over shorter periods but dig below the aggregate surface to discern and explain productivity differences over crops zones and farmer groups micro analysis is useful for policy and technology formulation and for infrastructure and commodity promotion strategies further many aggregate studies are limited to only a few composite product categories because of lack of more detailed data on labor land and capital allocations over crops to obtain finer distinctions among crops one needs detailed farm management surveys since the spate of african farm management studies in the 1960s and 1970s soils have rapidly degraded access to land has become increasingly constrained factor and credit markets have changed structurally and nonfarm activity by farm households has apparently increased these changes should affect productivity across farm types suggesting the need to revive attention to farm level analysis past farm level productivity work in africa which largely used positive analysis tended to stratify the sample exogenously based on farm characteristics generally by farm size use of animal traction access to credit use of new seed varieties land tenure status or income we follow these earlier studies by stratifying the farm household data by a factor we expect to affect technical parameters namely farm capital in the guinean zone of burkina faso in particular we stratify according to whether the household owns animal traction equipment foll wing barrett et al and jaeger and matlon besides adding to empirical evidence on the productivity effects of animal traction we endogenously stratify the sample with a selectivity model an approach too rarely taken with a few recent exceptions such as carter in productivity research we then estimate production functions controlling for selectivity bias such an approach also allows us to test the indirect effect of nonfarm income on productivity through its effect on technology adoption as embodied in farm capital acquisition studies of nonfarm income effects on capital acquisition are not absent in the literature e g barrett et al in eastern burkina but they have been somewhat neglected in farm level work and neglected even more in aggregate level research because of the rarity of rural nonfarm income data

the 1979 federal reserve policy shift some evidence using causality tests on 6 october 1979 the fomc announced a shift from federal funds rate ffr to nonborrowed reserves nbr targeting the sequence of events preceding this major policy change are well known and require only a brief recounting here prior to the 1979 announcement the fomc implemented monetary policy by confining the ffr to a narrow band about 50 to 100 basis points in width any tendency for the rate to move outside this range was countered by providing more or fewer nbr to the banking system the underlying assumption upon which this strategy was based was that money demand was stable the fed could then control the money stock by altering interest rates thereby moving the public along a fixed money demand function during the mid 1970s however various events in the money market e g income and supply shocks financial innovation and portfolio readjustments lessened the stability of money demand and brought the twin objectives of monetary control and financial market stability into frequent conflict the record shows that these conflicts were usually resolved in favor of interest rate stability rather than monetary control the consequence of ffr targeting was inflation attempts to maintain a stable ffr at the operating level in the face of money demand shifts forced the central bank to exceed its money growth targets for periods long enough to increase nominal aggregate demand in the economy with the adoption of the nbr strategy the fed attempted to achieve better control over inflation by short circuiting the endogenous influences of spending on the growth of the money stock in contrast to the pre 1979 policy spending shocks would now be reflected in ffr movements which would to some extent generate pressures to return money growth to its desired path subsequent to the announced policy shift there was much doubt about whether the federal reserve was successfully executing a nbr plan the gist of this skepticism centers on the belief that the new procedures were technically flawed specifically that reserves targeting when combined with lagged reserve accounting and borrowings projection errors resulted in short run accommodation increased interest rate and money growth volatility

a real model of the world business cycle abstract in this paper a stochastic two country log linear infinite horizon model is used to analyze the generation and transmission of economic fluctuations across countries it is argued that following a country specific supply disturbance production interdependence and unitary elasticities in consumption and production are sufficient to generate comovements in aggregate economic activity investment and trade that are persistent over time and positively correlated across countries however the empirical analysis carried out for the usa japan germany and uk for the 1960 82 period suggests that common shocks rather than trade links are responsible for this pattern of comovements

federal reserve interest rate targeting rational expectations and the term structure abstract the amount of information in the yield curve for forecasting future changes in short rates varies with the maturity of the rates involved indeed spreads between certain long and short rates appear unrelated to future changes in the short rate contrary to the rational expectations hypothesis of the term structure this paper estimates a daily model of federal reserve interest rate targeting behavior which accompanied by the maintained hypothesis of rational expectations explains the varying predictive ability of the yield curve and elucidates the link between fed policy and the term structure

the rural non farm economy prospects for growth and poverty reduction summary policy makers have high expectations for the rural non farm economy rnfe given high income shares growing employment and frequently low capital requirements they see the rnfe as a potential pathway out of poverty for their rural poor yet available evidence suggests that pro poor rural non farm growth does not occur automatically for the poor to benefit from rural non farm growth policy makers must stimulate buoyant rural economies with robust non farm income growth not simply low productivity employment moreover the poor must gain access to growing market niches fluid labor markets provide one important bridge linking the rural poor to growing non farm opportunities

federal reserve control of the money stock comment it is widely believed that the money stock of the united states somehow defined should play a central role in the conduct of federal reserve monetary policy in particular it is believed that the federal reserve should publicly announce a target time path for the money stock and then try to make the actual stock follow that path closely the analytical basis for this approach to federal reserve policy however is seriously deficient unfortunately moreover debate about this approach seldom focuses on the important controversial issues about which views can justifiably differ instead the debate often becomes mired in confusion and false issues one important source of confusion is an inadequate analysis of the operating procedures through which the federal reserve implements its policy from one short run period to the next a second source is a widespread misperception of the economic processes determining the money stock most noneconomists and even many economists seem to believe that the federal reserve can straightforwardly cause the money stock to follow a target path closely month by month provided only that the federal reserve conscientiously tries to do so a third source of confusion is a poor understanding of the two stage decision process implicit in the

the banking industry under uncertain monetary policy abstract the optimal loan decisions of banks are shown to be dependent on the banks rational forecast of the future federal funds rate which in turn is related to the policy rule used by the fed consequently a change in the policy of the fed will alter the reduced form model of the banking industry this result brings into question the fed s ability to predict and control the money stock under the procedure adopted by the fed between october 1979 and september 1982

union wage differentials in the public and private sectors a simultaneous equations specification the paper attempts to integrate new approaches to estimating union wage effects with the analysis of public private sector wage differentials estimates of the union differential in both public and private sectors allowing for the endogeneity of union status are presented the hypothesis that the recently measured rents to public sector employment primarily reflect the recent increase in unionization in that sector is examined and receives considerable empirical support there was evidence of positive selection into the union sector especially for private sector workers union status appears to be strongly influenced by the expected wage gain from joining the union sector

the policy evaluation problem and the demand for money abstract this paper applies the lucas policy evaluation proposition to the money demand function we find some support for the hypothesis that the decrease in serial correlation of interest rates since the fed policy change in 1979 has resulted in an increase in the estimated elasticity of money demand

the relation between money growth variability and the variability of money about target abstract an increase in the speed at which the fed returns the money stock to its targeted path following a stochastic shock can cause a lower variance of money about the targeted level while causing a greater variance of the growth rate of the money stock

dynamic monetary control and interest rate stabilization abstract interest rate stabilization results in an instrument shortage that complicates monetary control by introducing strategic considerations into the trading desk s decision problem the paper demonstrates that when expected future open market operations influence current bank and depositor behavior an instrument shortage is necessary and sufficient for the commitment policy to be time inconsistent and for the discretionary policy to be suboptimal i e worse than the commitment policy the moving average component of the commitment policy is of higher order than the discretionary policy under either regime the expected value of the representative bank is increasing in the trading desk s emphasis on interest rate stability

monetary policy lessons of recent inflation and disinflation by 1975 most economists agreed that the money demand function in the united states was reasonably stable and could serve as a reliable basis for the formulation of monetary policy those suspicious of monetarism were on the defensive in the light of the apparently inexorable increase of m1 velocity of about three percent per year with deviations of only a few tenths of a percent experience with rising money growth and rising inflation through 1980 only confirmed monetarist views as figure 1 shows all this had changed by 1986 with disinflation in the 1980s m1 velocity departed convincingly from its 1953 79 trend the money demand function seems to have fallen apart and is apparently not a reliable basis for monetary policy after all consequently the first major section following this introduction is devoted to the decline of velocity after 1981 and the demise of the standard money demand function some authors including i believe benjamin friedman conclude that this evidence leaves us so uncertain about the nature of money demand that policymakers cannot rely at all on any presumed money demand regularities in contrast my working hypothesis is that the money demand continues to be a stable function of relatively few variables but that the interest elasticity of money demand is substantially higher than previously thought others have sought money demand explanations in terms of regime shifts but that literature will not be discussed here events have not been kind to keynesian monetary policy positions either keynesians tend to concentrate on interest rates especially real interest rates as the best guide to the effects of monetary policy on the economy the real rate is discussed

links between nonfarm income and farm investment in african households adding the capital market perspective farm household surveys in the 1970s and 1980s showed that nonfarm activities provide an important share of household income contrasting with the conventional image of rural african households as deriving their food entitlement almost exclusively from the land e g matlon collier and lal low reardon et al haggblade hazell and brown much of the literature on nonfarm income has concentrated

agricultural input credit in sub saharan africa telling myth from facts recent evidence shows that many sub saharan african farmers use modern inputs but there is limited information on how these inputs are financed we use recent nationally representative data from four countries to explore input financing and the role of credit therein a number of our results contradict conventional wisdom found in the literature our results consistently show that traditional credit use formal or informal is extremely low across credit type country crop and farm size categories instead farmers primarily finance modern input purchases with cash from nonfarm activities and crop sales tied output labor arrangements which have received little empirical treatment in the literature appear to be the only form of credit relatively widely used for farming

intermediate monetary targets and macroeconomic fluctuations it is investigated whether the choice of intermediate target has altered macroeconomic fluctuations and whether the observed changes are consistent with predictions from economic theory since implications from the theoretical literature focus on the effects of structural disturbances an empirical analysis must identify these effects the structural vector autoregressive var technique estimates structural disturbances using restrictions from standard macroeconomic theory based on descriptions of actual targeting procedures by insiders to federal reserve policy decisions the intermediate target for the united states is identified as the interest rate from 1951 to 1969 and money from 1970 to 1986 var models are estimated over each subsample to assess whether the estimated structural disturbances cause endogenous variables to behave as economic theory predicts tests are also performed to assess whether or not the targeting rule affects the variance of endogenous variables attributable to structural sh

rural livelihoods and poverty reduction strategies in four african countries this paper compares and contrasts rural livelihoods in uganda kenya tanzania and malawi with a view to informing rural poverty reduction policies within poverty reduction strategy plans prsps low household incomes in rural areas of all countries are associated with low land and livestock holdings high reliance on food crop agriculture and low monetisation of the rural economy these adverse factors are in some instances made more difficult by land sub division at inheritance declining civil security in rural areas deteriorating access to proper agronomic advice and inputs and predatory taxation by decentralised district councils better off households are distinguished by virtuous spirals of accumulation typically involving diverse livestock ownership engagement in non farm self employment and diversity of on farm and non farm income sources lessons for prsps centre on the creation of a facilitating rather than blocking public sector environment for the multiplication of non farm enterprises seeking creative solutions to the spread of technical advice to farmers and examining critically the necessity for and impact of tax revenue collection by district councils on rural incomes and enterprise

global value chains large scale farming and poverty long term effects in senegal this paper presents panel data evidence on the impact of expansion of global value chains and large scale export oriented farms in developing countries over almost a decade we estimate the income effects of wage employment on large scale farms in the horticultural export sector in senegal using data from two survey rounds covering a seven years period of rapid expansion of the sector we estimate average income effects as well as heterogeneous income effects using fixed effects and quantile fixed effects regressions we find that poverty and inequality reduced much faster in the research area than elsewhere in senegal employment in the horticultural export sector is associated with higher household income and the income effect is strongest for the poorest households expansion of the horticultural export sector in senegal has been particularly pro poor through creating employment that is accessible and creates substantial income gains for the poorest half of the rural population these pro poor employment effects contrast with insights in the literature on increased inequality from rural wage employment

the return of the liquidity effect a study of the short run relation between money growth and interest rates in this article i use band pass filters to investigate the short run relationship between money growth and interest rates i find a negative correlation between short run movements in money growth and interest rates which i interpret as evidence that the liquidity effect dominates the anticipated inflation effect

expanding access to agricultural inputs in africa a review of recent market development experience abstract this paper asks what can be done to expand input use in africa and can it be done in a manner that supports continued growth of private sector input markets the precarious food security situation in many african countries has prompted governments and donors to use input distribution or credit programs as a means of rapidly increasing food supply for the poor these efforts however often reduce the ability of input market development programs to stimulate commercial interest in input supply a review of both types of programs describes recent efforts to address constraints to expanded input use and finds that further expansion is often constrained by inadequate investment in a variety of public goods needed to stimulate input led agricultural intensification rather than continuing to invest resources in programs to provide inputs or credit directly to farmers governments with donor assistance should consider shifting their focus to the serious deficiencies in the provision of public goods roads irrigation basic education market information systems research and extension and improved institutions contract law and enforcement systems of grades and standards improvements in these areas can both lower costs of supply and increase farm level demand creating a situation where the private sector will have greater incentives to expand input distribution networks to zones and farmers who currently do not have access

moving up or moving out insights into rural development and poverty reduction in senegal summary while worldwide progress in poverty reduction has been impressive sub saharan africa is lagging behind with slow growth and a high poverty headcount ratio there are fierce debates on how sub saharan africa can foster pro poor growth and the role of agriculture and small versus large scale farming in poverty reduction we contribute to this debate with micro economic empirical evidence from the senegal river delta an area that recently experienced rapid rural development we use household survey data from two panel rounds in 2006 and 2013 and a cluster analysis to investigate livelihood income and poverty dynamics in the region we find that with 4 3 annual growth in average household income 29 5 percentage points poverty reduction and 4 2 percentage points inequality reduction over the period 2006 13 development in the senegal river delta region has been remarkably pro poor income growth and poverty reduction have been most impressive among households moving into wage employment on large scale horticultural export farms and in an emerging service sector income growth in small scale agriculture and non farm businesses has been more modest but has affected the largest number of households transformation in both farm and non farm sectors has driven rural development in the senegal river delta region and investments in both large and small scale agriculture have contributed importantly to household income growth and poverty reduction our findings imply that foreign investments in large scale commercial and export oriented farming can trigger pro poor growth directly through employment effects and indirectly through investment and consumption linkages with the small scale farm and non farm sector

migration remittances and agricultural productivity in china in our paper we have used the new economics of labor migration framework to trace the complex linkages that exist among migration remittances and agricultural productivity in china constraints in the operation of on farm labor and capital or insurance markets or institutions provide households with a motivation to migrate and distort on farm operations when labor leaves in our household sample the net impact of migration and remittances on maize production is negative excerpt

1979 1982 rules or discretion in monetary policy gregory hoelscher what determined m1 growth from november 1979 through october 1982 a reaction function is developed and tested which ascribes the level of ml to two fed motives one is the fed s desire to hit its money growth targets the other is to carry out a counter cyclical short run monetary policy both motives are found to be significant during the period this evidence is consistent with the contention of some economists that the period was not a valid test of monetarist policy rules i introduction in october of 1979 the federal reserve system announced that it would use a new operating procedure that would allow it to place strong emphasis on controlling ml this policy shift from an interest rate target regime to a non borrowed reserves target regime was widely considered as tacit acceptance of the monetarist doctrine monetarists had been calling for a policy of stable gradually declining and pre announced money growth paths the change in operating procedure was designed to give the fed greater control over ml and to dramatize the fed s commitment to slowing money growth and inflation at the time many expected the new operating policy to result in a more stable money growth path at the expense of some short term interest rate variability the rate of inflation fell from 13 3 percent in 1979 to 3 9 percent in 1982 but the variability of both short term interest rates and of money growth increased substantially ore importantly the economy slipped into a brief recession in early 1980 and a longer and much more severe one in late 1981 by october 1982 the fed announced that it would de emphasize ml as a target variable but would continue to monitor the broader monetary aggregates thus a three year monetarist inspired experiment came to an end benjamin friedman 1984 and bryant 1983 argue that the events of 1979 82 demonstrate that monetarism as a policy guide is inadequate other economists disagree with these criticisms milton friedman 1984 mccallum 1984 and poole 1982 blame the high variance of monthly or quarterly growth rates in m1 for the poor post 1979 performance of the economy this paper assesses formally the determinants of m1 growth during the 1979 82 period if the fed was attempting to use m1 to fine tune the real sector then the argument that the 1979 82 period was not a valid test of the monetarist approach to monetary policy is that much stronger on the other hand if changes in m1 cannot be explained by fine tuning motives then perhaps the period does represent a test of monetarist policies the next section discusses the reaction function used in the paper section iii describes the data and the test results the evidence is consistent with the hypothesis that the money growth targets and either of two measures of real economic performance the unemployment rate and industrial production were significant determinants of fed policy during the late 1979 to late 1982 period section iv contains conclusions ii methodology the empirical tests use a reaction function the use of a reaction function does not imply that the federal reserve board or the open market committee explicitly acts in accordance with the function the reaction function is instead an as if assumption the fed is assumed to act as if it minimizes a loss function reaction functions have been estimated by a large number of authors barth sickles and wiest 1982 summarize many of the papers published in 1978 and earlier they report that unemployment and to a lesser extent inflation were most commonly cited as significant determinants of federal reserve policy during various portions of the 1952 77 period more recent papers by abrams froyen and waud 1980 levy 1981 allen and smith 1983 bradley 1984 witte 1984a 1984b and bradley and potter 1986 have extended the literature by including additional variables and time periods in the analysis

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

rural nonfarm employment and farming household level linkages this article introduces the articles in agricultural economics vol 40 no 2 march 2009 first we introduce their objectives in a brief review of existing literature on developing country trends in rural income diversification in particular rural nonfarm employment rnfe and its impact on farm technology choice in crops and livestock and thus on agricultural modernization and diversification then we preview the key points of the articles which use distinctive primary datasets from albania bulgaria china india mexico nigeria the philippines senegal and vietnam to document the impacts of rnfe and their implications for farm technology and farm activity

trade interdependence and the international business cycle a stochastic general equilibrium model of the world economy is developed to analyze the contribution of trade interdependence to international business cycles we test some of the implications of the model using data from ten major industrial countries and a variety of detrending techniques to calculate the cyclical component of output we find that the significance of trade in the transmission of economic disturbances across countries is not robust to the choice of the detrending method in general the role of trade interdependence is moderate and seem to have been stronger in the period before 1973

the future of small farms new directions for services institutions and intermediation summary efficient pre and post harvest services are essential if small farms in high potential areas are to intensify production contribute to economic growth and reduce poverty they also matter if small farms in marginal areas are to manage their natural resource base in the face of growing population pressure and climate change difficulties that smallholders face in accessing services are reviewed showing how incentives for commercial delivery of services to smallholders differ between staple food traditional cash crop and high value product supply chains the major challenge in service delivery to smallholders in much of africa concerns coordination of service development and delivery different forms of intermediary institution for achieving such coordination are examined

does nonagricultural labor relax farmers credit constraints evidence from longitudinal data for vietnam we examine the relationship between participation in nonagricultural labor activities and farming production decisions focusing on the use of inputs using longitudinal data for vietnam from 1993 to 1998 we find that households engaged in nonagricultural labor spend significantly more on seeds services hired labor and livestock inputs this is consistent with the hypothesis that nonagricultural labor income relaxes credit constraints to farming

consumption risk technology adoption and poverty traps evidence from ethiopia much has been written on the determinants of input and technology adoption in agriculture with issues such as input availability knowledge and education risk preferences profitability and credit constraints receiving much attention this paper focuses on a factor that has been less well documented the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests building on an explicit model this is explored in panel data for ethiopia historical rainfall distributions are used to identify the counterfactual consumption risk controlling for unobserved household and time varying village characteristics it emerges that not just ex ante credit constraints but also the possibly low consumption outcomes when harvests fail discourage the application of fertilizer the lack of insurance causes inefficiency in production choices