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Assessing The Governance For Commodity Price Stabilization - A Retrospective Look

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  • Pop Larisa Nicoleta

    () (Babes-Bolyai University, Faculty of Economics and Business Administration)

Abstract

The volatility of commodity prices has become once again a matter of profound and controversial debates for both political and academic spheres worldwide in the framework of the global economy severely distressed by the recent economic turbulences. Although commodity markets were already notorious for their price instability, the events the world economy experienced in the years 2000s offered new connotations to this phenomenon. In the first decade of this millennium, the commodity markets have struggled with high volatility, with prices reaching historical peaks just to crash dramatically some months later and very soon to restart their rise. The significant increase in volatility generated many debates about its triggering factors, the implications in terms of risk exposure of economic actors, but also the need for reconfiguring regulatory policy frameworks. The quest for the most appropriate means to deal with commodity price turbulences has known different stages over the years. Decision makers worldwide have sought alternatives, formulated and tested various mechanisms whose central aim was to mitigate price fluctuations. Governments formulate and implement consistent regulatory policies whose international coordination is a ‘sine qua non’ condition for stabilizing these markets. However, the turbulences on commodity markets often generate policy responses that sometimes exacerbate rather than mitigate the price instability. The purpose of this paper is to assess the subject of governance regarding commodity price stabilization, offering a retrospective look at the mechanisms implemented over the years, with a central focus on the International Commodity Agreements – instruments through which in the previous decades the producer and consumer governments worldwide pursued price stabilization for some key commodities like sugar, coffee, cocoa, tin and natural rubber. After analyzing the effectiveness of the International Agreements and debating their reason for failure and the lessons learned, the paper approaches the shift towards a different paradigm imposed by the current context of a globalized world economy where all actions and policies aim for market liberalization. As the price volatility is rarely the outcome of a singular cause, the results of the present paper suggest that combined solutions – public intervention and market-based – must be formulated in order to effectively tackle the problem of price instability.

Suggested Citation

  • Pop Larisa Nicoleta, 2015. "Assessing The Governance For Commodity Price Stabilization - A Retrospective Look," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 504-513, July.
  • Handle: RePEc:ora:journl:v:1:y:2015:i:1:p:504-513
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    File URL: http://anale.steconomiceuoradea.ro/volume/2015/n1/057.pdf
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    References listed on IDEAS

    as
    1. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
    2. Galtier, F., 2009. "How to Manage Food Price Instability in Developing Countries ?," Working Papers MOISA 200905, UMR MOISA : Marchés, Organisations, Institutions et Stratégies d'Acteurs : CIHEAM-IAMM, CIRAD, INRA, Montpellier SupAgro - Montpellier, France.
    3. Akiyama, Takamasa & Larson, Donald F. & DEC, 1994. "The adding-up problem : strategies for primary commodity exports in sub-Saharan Africa," Policy Research Working Paper Series 1245, The World Bank.
    4. Anderson, Ronald W & Gilbert, Christopher L, 1988. "Commodity Agreements and Commodity Markets: Lessons from Tin," Economic Journal, Royal Economic Society, vol. 98(389), pages 1-15, March.
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    More about this item

    Keywords

    price volatility; commodity markets; international agreements; governance for price stabilization; public intervention mechanisms; market-based mechanisms.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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