Commodity price stabilisation: macroeconomic impacts and policy options

Abstract

A macroeconometric simulation study is undertaken to evaluate the impact of commodity price stabilisation (CPS) schemes for the export tree crop industry in Papua New Guinea. The findings suggest that there is a negligible level of favourable macroeconomic impacts of CPS. Contrary to the expectation, CPS adversely affects the stability of monetary and external sectors (BOP). CPS policy has failed to stabilise the macroeconomy. The price stabilisation policies are no longer appropriate from the macroeconomic point of view. Technical change, futures market and rural savings are the possible alternative policy options to manage the price risk.

A macroeconometric model of a developing economy

“…Finally, three sets of multiplier analyses were carried out and the impacts of increase and or decrease in exogenous variables (commodity price, price stabilization and price subsidy) simulated. The results indicate model symmetry and the impacts are consistent with economic theory (see Kannapiran 1998Kannapiran , 2000.…”

On the costs of food price fluctuations in low-income countries

“…In summary, standard welfare analysis confirms the frequent findings in the literature that food price stabilization usually has small potential economic efficiency gains, has limited impacts on the poor, and generates the most benefits for large-scale food producers (Newbery and Stiglitz, 1981;Kannapiran, 2000;Larson et al, 2004). The potential gains from stabilization may be higher when poor consumers who produce little food spend a large proportion of their income on food, and are highly risk averse, make up a high proportion of the population.…”

“…However, the argument that food price fluctuations retard investment and growth has also been challenged (see Larson et al, 2004). MacBean (1966), Deaton (1992), and Kannapiran (2000) have all found no significant relationship between fluctuations and the rate of growth. Given that the growth effect may dominate conventional welfare costs of food price fluctuations, resolving this issue is important.…”

Significance and development preconditions of commodity exchange trade with agricultural products in Serbia

“…Margin accounts) od strane učesnika u trgovanju. Marginski računi se dnevno saldiraju u odnosu na kretanje cene robe koja je u njihovom temelju, sa ciljem da na računu uvek bude dovoljno garantnih sredstava i da učesnik koji je u gubitku ne odustane od izvršenja ugovora (Kannapiran, 2000).…”