An assessment of the impact on agricultural prices and output of anticipated versus unanticipated monetary variability

The effects of anticipated versus unanticipated money growth on total, nonfarm, and farm real gross domestic product, real net farm income, real prices received by farmers for crops and livestock, and the real value of agricultural exports are evaluated. The distinction between anticipated and unanticipated components of money growth is motivated by the new classical rational expectations assertion that. anticipated money growth is discounted by agents and has no real effects, while unanticipated money may have real impacts. The differentiation of money growth into anticipated and unanticipated components follows a rational expectations scheme using Granger causality tests. The money growth equation and the output, real price, and agricultural export equations are estimated by a two-step estimation procedure.

The regression results for total and nonfarm real gross domestic product and real net farm income indicate an influence from both anticipated and unanticipated components of money. On the other hand, real farm gross domestic product appears to be affected by only unanticipated components of money. The regression results for prices received by farmers for crops and livestock, and the real value of agricultural exports indicate little influence from either anticipated or unanticipated components of money. In sum, the results suggest that neither anticipated nor unanticipated money is always neutral, but only limited evidence is found of monetary impacts specifically on agriculture.