ABSTRACT
The implications of macroeconomics for the agricultural sector have received greater attention since the late 1970s, because of the increasing dependence of the sector on national and international economic/financial forces. Increasingly, those forces are communicating greater volatility to the agricultural sector via financial and commodity markets. To explore issues pertinent to the international dimensions of agricultural finance and trade, it is necessary to look at macroeconomic events in the context of an open economy. An open economy is characterized by the flow of capital and commodities into and out of the various national economies in response to changing interest rates and prices. Keynesian macroeconomic theory serves as a useful starting point to consider the concept of a closed versus an open economy. Macroeconomic policies can influence agriculture directly and indirectly through their effects on interest rates and exchange rates. A host of macroeconomic forces affects interest rates, exchange rates, and agriculture.
