The effect of government policies on agricultural prices and output in a developing country

This paper develops a model for Ghana and uses the model to simulate the impact of alternative government policies (including those proposed by the International Monetary Fund [IMF] and the World Bank) on output and prices in the agricultural sector. In the model the consumer prices of food and nonfood manufactured goods are determined by forces of demand and supply in the respective submarkets. The modeling framework proposed allows the capture of the parallel market effect of smuggling and evasion of price controls via indirect measures. The links between the cocoa and noncocoa producing sectors are incorporated in the model. The model also emphasizes the heterogeneity in the structure of prices across both the cocoa and the noncocoa producing sectors. -from Authors