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The Elimination of Madagascar's Vanilla Marketing Board, Ten Years On

  • Cadot, Olivier
  • de Melo, Jaime
  • Dutoit, Laure

Commodity prices are usually very slow to recover from adverse shocks. This is one of the reasons why it has proven so difficult either to smooth their effect or to stabilize them, and why it is sometimes argued that they should behave as if shocks were permanent. There is no reason however why countries should not find ways to protect themselves. This paper develops one practical idea on how this could be done. Our goal is not to stabilize prices, but to smooth the income of the producers. Countries, we assume, should get protection against deviation of commodity prices from a moving average of past prices. This avoids the pitfalls of past stabilization that attempted to stabilize around a single price and yet our scheme gives countries time to adjust to permanent shocks. Over a period of a 50 years time horizon, we simulate that the median cost would be worth about six months of exports.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5548.

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Date of creation: Mar 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5548
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  1. De Melo, J. & Olarreaga, M. & Takacs, W., 1996. "Pricing Policy Under Double Market Power: Madagascar and the International Vanilla Market," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 96.06, Institut d'Economie et Econométrie, Université de Genève.
  2. Hoekman, Bernard & Michalopoulos, Constantine & Schiff, Maurice & Tarr, David, 2001. "Trade policy reform and poverty alleviation," Policy Research Working Paper Series 2733, The World Bank.
  3. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, World Bank Group, vol. 2(3), pages 255-71, September.
  4. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
  5. Margaret McMillan, 2001. "Why Kill The Golden Goose? A Political-Economy Model Of Export Taxation," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 170-184, February.
  6. Sahn, David E & Sarris, Alexander H, 1991. "Structural Adjustment and the Welfare of Rural Smallholders: A Comparative Analysis from Sub-Saharan Africa," World Bank Economic Review, World Bank Group, vol. 5(2), pages 259-89, May.
  7. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  8. Jonathan Isham & Michael Woolcock & Lant Pritchett & Gwen Busby, 2005. "The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth," World Bank Economic Review, World Bank Group, vol. 19(2), pages 141-174.
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