Compensation Gap between 6-8 Countries


Added on  2019-09-20

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Research Topic:The relationship between agricultural export growth and the Real Exchange Rate (RER) in SierraLeonePurpose:In Africa agriculture has some examples of successful development on a local basis, but thebroad trends over recent decades have been adverse. This been most evident in the overallreduction in food security. West Africa economy is basically an agrarian and a critical look at thestructure of agriculture shows that, mainly it could be divided into subsistence and commercialagriculture. The economy of Sierra Leone like other West Africa countries also rest heavily onagriculture. This sector contributing more than 30 % of the GDP and agriculture produce accountfor about 30 percent of the total foreign exchange earnings annually1. The importance ofagriculture in the Sierra Leone economy is further reflected by the fact that about 65% of thetotal populations are currently finding their likelihood in agricultural activities. Crop productionis the main sub-sector as it contributes about three-quarter of agricultural value added with riceholding the dominant position. Agriculture also accounts for about 10 % of export earnings2.BackgroundIt is however evident that total agriculture output has been falling annually. Even before the rebelincursion, production had been declining at an annual rate of at least 3 percent3. The period1970-1980s was characterized by poor agricultural export performance which has been blamedmostly on inappropriate and in consistent macro and micro economic policies that wereimplemented. These policies undermined local production and placed agricultural exports at amajor comparative disadvantage.Prior to the stabilization and adjustment reforms, the government played a dominant role inagricultural development including price regulation, exportation of cash crops and in some casesundertaking direct production. The role was mostly performance by the Sierra Leone Produce Marketing Board (SLPMB)which was charged with the sole responsibility of handling a variety of export crops to market,promote growth and stabilize price4. Due to poor performance in agricultural export characterized by large fluctuations in worldprices, this made the authorities to resort to the reassessment and implementation of various tradepolicies within a view of attracting satisfactory and sustainable responses from agriculture. Thesepolicies were implemented under over valued domestic currency which means low price for farmproducts5.Through the economics adjustment agenda, exchange rate and trade reforms occupied a coreposition. The Real Exchange Rate (RER) by virtue of its impact on the Internationalcompetitiveness of an economy, assumed an overriding importance among the cohort of policyvariables. The overvalued exchange rate system mentioned by the Sierra Leone government overthe years made the domestic price of tradable to fall in domestic currency terms and hencediscouraged the exportation of agricultural products
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Scope: According to G.E Schuh’s pioneering articles linking exchange rate to countries performance inthe global agricultural market, several attempts were made to quantify the effects of nominal andReal Exchange Rate movement on agricultural trade.Despite these studies, inadequate attention has been directed towards analysis of underlyingpolicies that directly influence Real Exchange Rate and that indirectly affect trade performance,specifically the issue of RER fluctuations has been ignored.Real Exchange Rate fluctuations is a particularly relevant issue in Sierra Leone where agricultureis a significant source of foreign exchange earnings and often the most import economic sector,providing large employment opportunities. This study is therefore carried out investigate theimpact of Real Exchange Rate fluctuation on agricultural export growth in Sierra Leone.Available literature suggests that an increase in the Real Exchange Rate i.e. a depreciation of theReal Exchange Rate; will increase the international competitiveness of agricultural export thereby leading to an increase in export. But whether a depreciation of the Real Exchange Rate willimpact positively on Sierra Leone’s agricultural export which are believed to be price inelasticsupply needs to be investigated.Methodology:1.This study will be divided into five chapters. 2.The Introductory chapter (Chapter One) will be followed by chapter two which will givean overview of exchange rate policies and misalignment of nominal exchange rate in thefixed and floating regimes and trend in agricultural export in Sierra Leone. Chapter threewill conduct literature review an analysis of the methodology and empirical analysis ofthe study are presented in chapter four. In the final chapter (Chapter Five) the summaryof findings and policy recommendations of the study are presented. Observe the findingsand see if there is any scope for further study which was not covered in their study. If anyscope exists then do further research on that to bridge the gap.3.After identifying the scope a hypothesis should be formed to conduct the further research.4.Conduct a secondary analysis of the available data to identify the reasons of thecompensation gap and why is it soaring high. Do a comparative analysis between UnitedStates, Canada, Europe and Japan. 5.Write the final report that combines the previous empirical studies, the understanding ofrelevant theory and practices and the qualitative analysis of the research.Timeline:The dates should be according to the deadlines of each submission. References:Adubi A.A and- Price exchange rate volatility and Nigerians Okunmadewa F. (1999)-Agriculture Trade flows. A dynamic analysis AERC Research Paper 87.
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