There have been different degrees of exchange rate disequilibrium in the developing countries during recent transition or reform periods. The level of the exchange rate and its misalignment can have significant impacts on agricultural policy measures such as the Producer Support Estimates (PSEs). However, little efforts have been made to explicitly take into account the issue of exchange rate misalignment. In the conventional PSE studies the prevailing actual (nominal) exchange rates are usually used. There is general agreement that the use of actual exchange rates may introduce a bias in the PSE calculations, and that this bias can be substantial when the actual rates are significantly out of equilibrium, but there is much less agreement on the most appropriate alternative. This dissertation proposes a theoretical and an empirical model for estimating equilibrium exchange rates. Within the context of these models, the equilibrium exchange rates are argued to be determined by a group of real economic fundamentals. These fundamentals within this study include technological progress (Balassa-Samuelson effect), levels of government expenditure, world interest rate, net capital inflows, terms of trade, and openness of the economy. Base on various time series techniques and using data from India and China, sensible long-run relationships are identified between the real exchange rate and these economic fundamentals. The long-run co-integrating relationships are used to derive the equilibrium exchange rates and to gauge corresponding misalignments for the currencies in the two countries. The relevance and usefulness of the exchange rate equilibrium and disequilibrium in the calculation of the PSEs for India and China are then discussed. Results from the commodity-specific measures including the Market Price Support (MPS) and the PSE show that agricultural support levels are quite sensitive to alternative exchange rate assumptions. Specifically, exchange rate misalignments have either amplified or counteracted the direct effect on agriculture from sectoral-specific policies. With a few commodity exceptions such an indirect effect in both countries is relatively small in magnitude and dominated by the direct effect. This is also the case when the indirect effect rises substantially as a result of more misaligned exchange rates. Counterfactual MPS measure calculated assuming the exchange rate is in equilibrium with different exchange rate pass-through is also presented. It is shown that when no exchange rate pass-through to domestic prices occurs, the transfer of the indirect effect of exchange rate misalignment into the counterfactual MPS is full. But when there is exchange rate pass-through, even though partially, the transfer of indirect effect is significantly smaller. Results based on the commodity-specific PSE show that the exchange rate effect also depends on the relative importance of different PSE components. In addition to a positive impact on the direct effects measured by commodity-specific PSE compared to those measured by commodity-specific MPS, the increasing share of budgetary expenditures in India's agricultural support in recent years has resulted in more pronounced indirect effects. For China, the exchange rate effects are more similar between the PSE and the MPS measures at the commodity level because of the dominance of the MPS component relative to the budgetary payments in the PSEs. Moving from commodity-specific to aggregate measures, one can observe a similar pattern of agricultural support. However, the exchange rate effect measured by the total PSE appears to be more important: it becomes several times larger in magnitude than the direct effect in periods of severe exchange rate misalignment. The exchange rate effect when the PSE is "scaled up" from covered commodities to an estimate for the total agricultural sector is also demonstrated even though the assumption imposed by scaling-up may be unrealistic if price support is concentrated among those products included in the analysis. Since the commodity coverage in both countries tends to be incomplete and the scaling-up procedure leads to a total MPS component of greater magnitude, larger exchange rate effects are found in the scaled-up than the non-scaled-up version of the total PSEs. The impact of scaling-up on the indirect effect is proportional to the share of covered commodities in the total value of agricultural production. Again for the PSEs at both the commodity and aggregate levels, the counter factual measures indicate a full transfer of indirect effect of exchange rate when no exchange rate pass-through is assumed. A large portion of the indirect effect disappears when incomplete exchange rate pass-through is assumed resulting in a smaller transfer of the effect to the counter factual PSEs. / Ph. D.

This study provides the strategies that can be implemented to promote the agricultural sector in KwaZulu-Natal and the theory behind economic development, as well as the importance of trade and export growth. There are restrictions in terms of trade and it is important that these are addressed before making a decision to choose a viable, potential and realistic country to export to. This study is aimed answer the research question if agriculture can be seen as a primary export sector in KwaZulu-Natal. Furthermore, this study includes background on the KwaZulu-Natal Province and mainly focus on the indicators such as GDP, employment, health issues and other indicators that will indicate that this province is of importance in South Africa in terms of the agricultural sector. This study uses SARS data to analyse and calculate the Revealed Comparative Advantage (RCA) of all agricultural products of the province. This is done to identify if there is a comparative advantage in the products studied in this study. The products of KwaZulu-Natal also show that this province’s agriculture can be seen as a primary export sector and that this sector is a major contribution to South Africa’s GDP and development. This study uses the Decision Support Model (DSM) to compare the results from the Revealed Comparative Advantage to identify the products and sectors which have the most export potential in the international market. This study reveals that the agricultural products and industries in KwaZulu-Natal with the highest overall export potential are chocolate and cocoa preps, refined soybean oil, and leather products as the three top performers among agricultural products and have the most export potential in the province. Concluding remarks are based on the findings made throughout the study. / Thesis (MCom (International Trade))--North-West University, Potchefstroom Campus, 2012

This study provides the strategies that can be implemented to promote the agricultural sector in KwaZulu-Natal and the theory behind economic development, as well as the importance of trade and export growth. There are restrictions in terms of trade and it is important that these are addressed before making a decision to choose a viable, potential and realistic country to export to. This study is aimed answer the research question if agriculture can be seen as a primary export sector in KwaZulu-Natal. Furthermore, this study includes background on the KwaZulu-Natal Province and mainly focus on the indicators such as GDP, employment, health issues and other indicators that will indicate that this province is of importance in South Africa in terms of the agricultural sector. This study uses SARS data to analyse and calculate the Revealed Comparative Advantage (RCA) of all agricultural products of the province. This is done to identify if there is a comparative advantage in the products studied in this study. The products of KwaZulu-Natal also show that this province’s agriculture can be seen as a primary export sector and that this sector is a major contribution to South Africa’s GDP and development. This study uses the Decision Support Model (DSM) to compare the results from the Revealed Comparative Advantage to identify the products and sectors which have the most export potential in the international market. This study reveals that the agricultural products and industries in KwaZulu-Natal with the highest overall export potential are chocolate and cocoa preps, refined soybean oil, and leather products as the three top performers among agricultural products and have the most export potential in the province. Concluding remarks are based on the findings made throughout the study. / Thesis (MCom (International Trade))--North-West University, Potchefstroom Campus, 2012