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MEASURING FARM INCOME UNDER CONDITIONS OF INFLATION: THE GAINS FROM BORROWING
Author(s) -
Hill G. P.
Publication year - 1984
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1984.tb01176.x
Subject(s) - economics , inflation (cosmology) , agriculture , debt , payment , real interest rate , econometrics , monetary economics , macroeconomics , interest rate , finance , geography , physics , theoretical physics , archaeology
Progress made in applying the principles of Current Cost Accounting (CCA) to measuring farming income is reviewed. Attention is focussed on the absence of any adjustment to farming income figures to incorporate the gains accruing from borrowing where the real burden of debt is eroded by inflation. A procedure based on deducting implied real interest charges, instead of nominal interest payments, is proposed. Revised values for U.K. farming income are estimated for the years 1974 to 1980. The revised figures range from values for income which are 29% greater than values which exclude the gains (or losses) from borrowing to values which are 25% lower.