REAL EXCHANGE-RATE MISALIGNMENT AND AGRICULTURAL EXPORT PERFORMANCE IN DEVELOPING-COUNTRIES

Incorrect real exchange rate alignment is a particularly relevant issue in developing countries where agriculture is a significant source of their foreign exchange earnings and is often the most important economic sector, providing large employment opportunities. We calculate measures of real exchange rate misalignment for 10 developing countries using a structural modeling approach. Our measures are then used in assessing the impact of misalignment on agricultural export supply for selected commoditites in these countries. In the first section we discuss the econometric model used to quantify real exchange rate misalignment. In the next section, we specify the export supply equation, which includes a misalignment variable, and discuss the impact of incorrectly aligned real exchange rates on agricultural export behaviour. Finally, implications are drawn for future research. -from Authors