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A Subsistence Linked Economy: The Case of the Solomon Islands
Author:
International Monetary Fund
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Series:
IMF Working Papers
Volume/Issue:
Volume 1989: Issue 104
Language:
English
Publication Date:
01 Jan 1989
DOI:
https://doi.org/10.5089/9781451947762.001
ISBN:
9781451947762
ISSN:
1018-5941
Pages:
20
Keywords:
WP; price level; adjustment coefficient; income function; income variable; money demand function; Personal income; Demand for money; Monetary expansion; Producer prices; Inflation
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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How are money demand, income, and the price level affected when a significant portion of the economically active population reverts to and withdraws from subsistence economic activity? This paper tries to find a quantitative answer to the question by highlighting the specific link between the monetized and the subsistence economy that exists in the Solomon Islands: the producer price of copra, the main cash crop. The paper includes this variable explicitly in the money demand function of an aggregated macroeconomic simultaneous equation model and finds a significant impact throughout the economy.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund