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The Asian Financial Crisis: Effects on U.S. Agriculture

Author

Listed:
  • Coyle, William T.
  • McKibbin, W. J.
  • Wang, Zhi
Abstract
This paper analyzes the likely effects of the recent Asian financial crisis on the U.S. economy and agriculture. It uses a multi-country, multi-sector dynamic intertemporal general equilibrium model, with endogenously modeled financial markets (G-cubed agriculture). Two simulations are done: one in which the crisis is confined to Korea and Southeast Asia, where the problem was most acute as of the fall of 1998, and another in which the crisis is assumed to deepen in Japan, China, and Taiwan to the same extent as it already has in Korea and Southeast Asia. The results show that the Asian financial crisis has a number of offsetting effects on U.S. agriculture. U.S. exports of agricultural and food products fall in response to declining demand in the affected countries in Asia and the appreciation of the U.S. dollar. U.S. agricultural and food exports are estimated to decline three times as much when Japan, China, and Taiwan become embroiled in the crisis than when it is confined to Korea and Southeast Asia. On the other hand, adjustments in global capital and energy markets in both scenarios reduce capital costs and input prices faced by U.S. farmers and, more broadly, stimulate domestic U.S. economic activity in the short run, particularly in interest-sensitive and energy-intensive sectors. Thus the shortrun effects of the Asian crisis on U.S. agriculture are ambiguous. Sectors relying more on domestic demand, such as livestock products and processed food, expand output, while export-oriented sectors such as food grains are negatively affected.

Suggested Citation

  • Coyle, William T. & McKibbin, W. J. & Wang, Zhi, 1998. "The Asian Financial Crisis: Effects on U.S. Agriculture," Staff Reports 278832, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278832
    DOI: 10.22004/ag.econ.278832
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    References listed on IDEAS

    as
    1. McKibbin, Warwick J. & Wilcoxen, Peter J., 1998. "The theoretical and empirical structure of the G-Cubed model," Economic Modelling, Elsevier, vol. 16(1), pages 123-148, January.
    2. Marcus Noland & Li-Gang Liu & Sherman Robinson, 1998. "Global Economic Effects of the Asian Currency Devaluations," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa56, April.
    3. McKibbin, W.J., 1997. "Regional and Multiregional Trade Liberalization: The Effects on Trade, Investment and Welfare," Papers 134, Brookings Institution - Working Papers.
    Full references (including those not matched with items on IDEAS)

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