The response of agricultural prices to a change of the New Zealand exchange rate

Abstract

The objective of this thesis is to establish the response of agricultural prices to changes of the New Zealand exchange rate. Following an outline of the theory of exchange rate changes a brief history of the use of exchange rate policy in New Zealand is given.

A general a priori case of the response of agricultural prices to a change of the exchange rate is established. The general case is examined by way of an analysis of the price setting mechanisms and price movements of wool, lamb and beef. A comparison of the actual and hypothesized price responses indicates that the full price effect of a New Zealand exchange rate change is not always reflected in a change of the domestic price of agricultural products.