Mr. Rabah Arezki, Mr. Christian Bogmans, and Mr. Harris Selod
This paper is the first to provide both theoretical and empirical evidence of farmland
globalization whereby international investors directly acquire large tracts of agricultural land
in other countries. A theoretical framework explains the geography of farmland acquisitions
as a function of cross-country differences in technology, endowments, trade costs, and land
governance. An empirical test of the model using global data on transnational deals shows that
international farmland investments are on the aggregate likely motivated by re-exports to
investor countries rather than to world markets. This contrasts with traditional foreign direct
investment patterns where horizontal as opposed to vertical FDI dominates.
Declining commodity prices during mid-2014-2016 posed significant challenges to commodity-exporting economies. The severe terms of trade shock associated with a sharp fall in world commodity prices have raised anew questions about the viability of pegged exchange rate regimes. More recently, the COVID-19 pandemic and the measures needed to contain its spread have been associated with a significant disruption in several economic sectors, in particular, travel, tourism, and hospitality industry, adding to the downward pressure on commodity prices, a sharp fall in foreign exchange earnings, and depressed economic activity in most commodity exporters. This paper reviews country experiences with different exchange rate regimes in coping with commodity price shocks and explores the role of flexible exchange rates as a shock absorber, analyzing the macroeconomic impact of adverse term-of-trade shocks under different regimes using event study and panel vector autoregression techniques. It also analyzes, conceptually and empirically, policy and technical considerations in making exchange rate regime choices and discusses the supporting policies that should accompany a given regime choice to make that choice sustainable. It offers lessons that could be helpful to the Caribbean commodity-exporters.