Alternative instruments for smoothing the consumption of primary commodity exporters
AbstractCountries that depend on a single primary export for their foreign earnings are likely to experience sharp fluctuations in export earnings and their underlying wealth, because of the instability of all primary commodity markets. As part of structural adjustment, several countries have liberalized their trade regimes, so domestic producers are no longer insulated from international price fluctuations. This paper concentrates on the management of country-level consumption risk, and considers actions which the government might undertake to reduce the cost of that risk. The paper reviews the costs of export price instability, with some reference to the empirical magnitudes. It considers the role of conventional instruments, including loans, price stabilization measures, and futures contracts. Particular attention is paid to the potential use of futures rollovers for longer-term price protection, and the effect of production response on that protection. The paper also discusses"commodity bonds"and dynamic consumption smoothing paths and offers conclusions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 558.
Date of creation: 31 Dec 1990
Date of revision:
Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Access to Markets; Markets and Market Access;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Worrall, Tim, 1990. "Debt with potential repudiation," European Economic Review, Elsevier, vol. 34(5), pages 1099-1109, July.
- Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
- Newbery, David M G & Stiglitz, Joseph E, 1982. "Optimal Commodity Stock-piling Rules," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 403-27, November.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1986.
"The Pure Theory of Country Risk,"
NBER Working Papers
1894, National Bureau of Economic Research, Inc.
- Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
- Eaton, Jonathan & Gersovitz, Mark & Stiglitz, Joseph E., 1986. "The pure theory of country risk," European Economic Review, Elsevier, vol. 30(3), pages 481-513, June.
- Eaton, Jonathan & Gersovitz, Mark, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
- Campbell, John & Mankiw, Gregory, 1987.
"Are Output Fluctuations Transitory?,"
3122545, Harvard University Department of Economics.
- Carr, Peter, 1987. " A Note on the Pricing of Commodity-Linked Bonds," Journal of Finance, American Finance Association, vol. 42(4), pages 1071-76, September.
- Deaton, A. & Laroque, G., 1989.
"On The Behavior Of Commodity Prices,"
145, Princeton, Woodrow Wilson School - Public and International Affairs.
- Albert Fishlow., 1987.
"Lessons of the 1890s for the 1980s,"
Economics Working Papers
8724, University of California at Berkeley.
- Kletzer, K.M. & Wright, B.D., 1990. "Sovereign Debt Renegotiation In A Consumption-Smoothing Model," Papers 610, Yale - Economic Growth Center.
- Schwartz, Eduardo S, 1982. " The Pricing of Commodity-Linked Bonds," Journal of Finance, American Finance Association, vol. 37(2), pages 525-39, May.
- Kletzer, K.M., 1988. "Sovereign Debt Renegotiation Under Asymmetric Information," Papers 555, Yale - Economic Growth Center.
- Peter H. Lindert & Peter J. Morton, 1989.
"How Sovereign Debt Has Worked,"
in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 39-106
National Bureau of Economic Research, Inc.
- Williams,Jeffrey C. & Wright,Brian D., 1991.
"Storage and Commodity Markets,"
Cambridge University Press, number 9780521326162, December.
- Bulow, Jeremy & Rogoff, Kenneth, 1989.
"A Constant Recontracting Model of Sovereign Debt,"
Journal of Political Economy,
University of Chicago Press, vol. 97(1), pages 155-78, February.
- Jeremy I. Bulow & Kenneth Rogoff, 1987. "A Constant Recontracting Model of Sovereign Debt," NBER Working Papers 2088, National Bureau of Economic Research, Inc.
- Jeremy A.Rogoff Bulow & Kenneth, 1986. "A Constant Recontracting Model of Sovereign Debt," University of Chicago - George G. Stigler Center for Study of Economy and State 43, Chicago - Center for Study of Economy and State.
- Feder, Gershon & Just, Richard E., 1977. "A study of debt servicing capacity applying logit analysis," Journal of Development Economics, Elsevier, vol. 4(1), pages 25-38, February.
- Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
- Newbery, David M, 1989. "The Theory of Food Price Stabilisation," Economic Journal, Royal Economic Society, vol. 99(398), pages 1065-82, December.
- Alejandro Drexler & Eduardo Engel & Rodrigo O. Valdés, 2001. "El cobre y estrategia fiscal óptima para Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Felipe Morandé & Rodrigo Vergara & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.), Análisis Empírico del Ahorro en Chile, edition 1, volume 1, chapter 9, pages 263-280 Central Bank of Chile.
- Larson, Donald F. & Varangis, Panos & Yabuki, Nanae, 1998. "Commodity risk management and development," Policy Research Working Paper Series 1963, The World Bank.
- Everhart, Stephen & Duval-Hernandez, Robert, 2001. "Management of oil windfalls in Mexico : historical experience and policy options for the future," Policy Research Working Paper Series 2592, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.