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Commodity Price Volatility, Vulnerability and Development

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  • Jean‐Louis Combes
  • Patrick Guillaumont

Abstract

This article examines the meaning and consequences of the developing countries’ vulnerability to the volatility of commodity prices. It first considers how to define and measure a country’s shocks and exposure arising from commodity price volatility in order to identify structural as distinct from policy vulnerability. The main channels through which price vulnerability influences economic growth are then presented. Finally, the policy implications for development aid, its allocation and design, are outlined. It is found that, while structural vulnerability is bad for growth, a policy of openness contributes to resilience. With the right rules, aid could play an important growth‐enhancing and poverty‐reducing role if allocated at least partly on the basis of vulnerability.

Suggested Citation

  • Jean‐Louis Combes & Patrick Guillaumont, 2002. "Commodity Price Volatility, Vulnerability and Development," Development Policy Review, Overseas Development Institute, vol. 20(1), pages 25-39, March.
  • Handle: RePEc:bla:devpol:v:20:y:2002:i:1:p:25-39
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    File URL: https://doi.org/10.1111/1467-7679.00155
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    Cited by:

    1. Jean-Louis Combes & Tahsin Saadi-Sedik, 2006. "How does trade openness influence budget deficits in developing countries?," Journal of Development Studies, Taylor & Francis Journals, vol. 42(8), pages 1401-1416.
    2. AfDB AfDB, 2005. "Working Paper 75 - External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa," Working Paper Series 2289, African Development Bank.
    3. Nureldin Hussain & Bernard Gunter, 2005. "Working Paper 75 - External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa," Working Paper Series 210, African Development Bank.
    4. Patrick Guillaumont, 2009. "An Economic Vulnerability Index: Its Design and Use for International Development Policy," Oxford Development Studies, Taylor & Francis Journals, vol. 37(3), pages 193-228.
    5. Bacon, Chris, 2004. "Confronting the Coffee Crisis: Can Fair Trade, Organic, and Specialty Coffees Reduce Small-Scale Farmer Vulnerability in Northern Nicaragua?," Center for Global, International and Regional Studies, Working Paper Series qt0xn3f86t, Center for Global, International and Regional Studies, UC Santa Cruz.
    6. Samba Mbaye, 2012. "Beggar-thy-Neighbor Effects of Currency Undervaluation: Is China the Tip of the Iceberg?," Working Papers halshs-00761380, HAL.
    7. AfDB AfDB, 2005. "Working Paper 75 - External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa," Working Paper Series 2209, African Development Bank.
    8. Aiello, Francesco Aiello, 2010. "Experiences with Traditional Compensatory Finance Scheme and Lessons from FLEX - Esperienze dei tradizionali sistemi di compensazione finanziaria e lezioni dal caso FLEX," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(1), pages 1-52.
    9. Pierre-Emmanuel Darpeix, 2019. "Literature review on the consequences of food price spikes and price volatility," PSE Working Papers hal-02072329, HAL.
    10. Lee Robinson & Alice Nicole Sindzingre, 2012. "China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia)," EconomiX Working Papers 2012-39, University of Paris Nanterre, EconomiX.
    11. Ian Bannon & Paul Collier, 2003. "Natural Resources and Violent Conflict : Options and Actions," World Bank Publications, The World Bank, number 15047, June.
    12. Francesco Aiello, 2009. "Experiences With Traditional Compensatory Finance Schemes And Lessons From Flex," Working Papers 200912, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    13. Maurice, Noemie & Davis, Junior, 2011. "Unravelling the underlying causes of price volatility in world coffee and cocoa commodity markets," MPRA Paper 43813, University Library of Munich, Germany, revised 2012.

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