Price vs. revenue stabilization through a buffer stock: Which is more financially feasible for LDCs?
Abstract Optimal control theory is used to analyze the implications of the adoption of price and LDC export revenue stabilization objectives by an international buffer stock for cocoa. The results obtained for the period 1956–76 suggest that the stabilization of either price or revenue at systematic trend would reduce the instability of both variables from that during the sample period. Although the stabilization of revenues at systematic trend decreases their average level, the stabilization of price has the opposite effect. Because of this, it may be financially feasible for the LDCs to provide the necessary resources for a price-stabilizing buffer stock.
INSTABILITY IN WORLD GRAIN MARKETS
The paper discusses the nature of international price variability for wheat and coarse grains. In particular, it explores the relationship between variability in national grain markets and international trade. Empirical evidence is presented on the degree to which short-run fluctuations in domestic grain production are transmitted to the world market by major countries or country aggregates, and on their absorption of international market variability. The impact of possible structural or policy changes upon future international price variability is explored. It is argued that multilateral action to promote greater international stability should focus on the modification of domestic storage policies to reduce the transmission of short-run domestic fluctuations in supply or demand to world markets.
Quantitative Evaluation of Stabilization Policies in International Commodity Markets
commodity markets. The "commodity boom" of 1972-75, and the rapid rise in grain prices in 1973-74 generated political pressures in both developed and less developed countries (LDCs) for commodity market control. The 1974 World Food Conference in Rome had as one of its themes the establishment and management of international reserve stocks to stabilize grain markets and provide food security. The 1976 meetings of the United Nations Conference on Trade and Development (UNCTAD) in Nairobi were dominated by a proposal to introduce an integrated program for commodities (IPC). This program has as its central point the creation of an extensive series of international commodity agreements to act as market stabilizers. Such developments have stimulated the interest of economists, who have sought to examine the issues raised from both theoretical and empirical perspectives. The purpose of this paper is to discuss briefly the major approaches that have been adopted in the empirical analysis of stabilization policy, to identify their advantages and disadvantages, and to indicate some important analytical questions that arise in the modeling of instability. The primary focus is on agricultural commodities, but methods and problems discussed are not confined to these alone.