Escobal, J. y Saavedra, J. (1990). Las variaciones del tipo de cambio real y el ingreso agrícola. Debate Agrario, (9), 11-29.

In order to correctly analyse price and output determination in the agricultural sector, three fundamental assumptions are used.

The first is that each product responds to specific particularities, so it is necessary to correctly typify the main transmission mechanisms of each crop or group of crops. Secondly, it is essential to bear in mind that, in both theoretical and empirical analysis, the macroeconomic environment conditions and modifies the nature of the relationship between the real exchange rate (TCR for its acronym in Spanish), prices and agricultural production.

Finally, when analysing the relationship between the TCR and the markets for different goods, it is essential to take into account the existence of important substitution effects in production and consumption, both in the short and long run; that is, to better approximate reality, the analysis must consider simultaneously the evolution of the different types of agricultural goods. The first section of this article briefly describes the overall evolution of agricultural prices and incomes and of the TCR. The second section provides a theoretical analysis of the relationship between exchange rate policy and farm income. Finally, the third section applies the previous discussion to the Peruvian case, also reviewing the position of various authors who have analysed the issue. This last part also describes the results of an econometric model for the simultaneous determination of prices and production of importable, exportable and non-tradable goods, as well as the TCR and the real wage.