Commodity Buffer Stocks

Fortuna on a Roman denarius

[This bibliography of articles and books in the economics literature on commodity buffer stocks is constantly being added to]


I - Commodity Reserves for Monetary Stability

(A) "Symetallism" and Early Classics

(B) The Benjamin Graham Debates

(C) Post-1940s Commodity Reserve Currency Proposals

II - Commodity Price Stabilization

(A) Welfare Impacts of Price Stability: Theory

(B) Buffer Stocks and Private Incentives

(C) Buffer Stocks and International Trade

(D) Buffer Stocks and Economic Development

(E) Implementation and Evaluation of Buffer Stock Schemes

(F) Specific Schemes, Buffer Funds and Unclassified

III - Secondary Literature




(A) "Symmetalism" and Early Classics

[Note: "Bimetallism" argued that currency should be convertible/backed by gold or silver. "Symmetalism" argued that currency be convertible to a basket of metals, i.e. a mix of gold and silver in fixed proportion to each other. Analytical forerunner of commodity basket-backed currency.]

Leon Walras (1874) Elements of Pure Economics: or the theory of social wealth. 1954 trans., Homewood, Ill: Richard D. Irwin.

[on p.339 discusses the determinacy of prices when there is "bimatellism with a fixed quantity ratio".]

William Stanley Jevons (1875) Money and the Mechanism of Exchange.

[Apparently refers to a commodity-basket-backed currency]

Alfred Marshall (1887) "Remedies for Fluctuations of General Prices", Contemporary Review, March. Reprinted in A.C. Pigou, 1925, editor, Memorials of Alfred Marshall. London: Macmillan.

[Original "symetallism" proposition, i.e. bimetallism "with a fixed quantity ratio" where instead of convertibility into either gold or silver, conversion is into a bundle of gold and silver.

Alfred Marshall (1923) Money, Credit and Commerce. 1965 edition, New York: Augustus M. Kelley.

["Symetallism" continued]

Gilbert N. Lewis (1925) "A Plan for Stabilising Prices", Economic Journal

Dennis H. Robertson (1926) Banking Policy and the Price Level.

Jan Goudriaan (1932) How to Stop Deflation. London.

[Early call for commodity reserves for price stability]

John Maurice Clark (1933) "The Proposal for a Composite Commodity Currency", in Economic Essays in Honor of Gustav Cassel. London.

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(B) The Benjamin Graham Debates

Frank D. Graham (1933) "The Creation of Employment", Economic Forum, Vol. I, p.144-54.

Benjamin Graham (1933) "Stabilized Reflation", Economic Forum, Vol. I, p.186-93.

[First exposition of the proposal]

Paul Einzig (1936) Monetary Reform: Theory and practice. London.

Benjamin Graham (1937) Storage and Stability: A modern ever-normal granary. 1997 reprint, New York: McGraw-Hill.

[the book]

Frank D. Graham (1938) "Review of Benjamin Graham's Storage and Stability" American Economic Review, Vol. 28 (3), p.575-7.

[Enthusiastic review of Graham]

Don S. Anderson (1938) "Review of Benjamin Graham's Storage and Stability", Journal of Political Economy, Vol. 46 (3), p.435-7.

[Somewhat critical of the practicality of Graham's plan, but sympathetic]

John Maynard Keynes (1938) "The Policy of Government Storage of Foodstuffs and Raw Materials", Economic Journal, September

Richard A. Lester (1939) Monetary Experiments. Princeton: Princeton University Press.

L. St Clare Grondona (1939) National Reserves for Safety and Stabilization. London.

Benjamin Graham (1940) "Storage and Stability: A plan for monetizing the commodity surplus", in A Forum on Finance, p.176-8.

Frank D. Graham (1940) "The Primary Functions of Money and their Consummation in Monetary Policy", American Economic Review, Vol. 30, p.1-16.

[Identifies Graham's proposal as the only possible way of fully consumating the twin roles of money as unit of account and "bearer of options".]

Frank D. Graham (1940) "Achilles' Heels in Monetary Standards", American Economic Review, Vol. 30, (1), p.16-32.

[Sustained attack on gold standard.]

Frank D. Graham (1941) "Transition to a Commodity Reserve Currency", American Economic Review, Vol. 31 (3), p.520-5.

[One of the main papers on commodity-reserve currency]

John Maynard Keynes (1942) "On Commod Control", in D. Moggridge, editor, 1980, Collected Writings of John Maynard Keynes, Vol. XXVII: Activities 1940-46 Shaping the Post-War World: Employment and Commodities. London: Macmillan.

[Propose "International Commodity Control" agency responsible for financing and creating of buffer stocks in most raw materials.]

Frank D. Graham (1942) Social Goals and Economic Institutions. Princeton, NJ: Princeton University Press.

W.T.M. Beale, M.T. Kennedy and W.J. Winn (1942) "Commodity Reserve Currency: A critique", Journal of Political Economy, Vol. 50 (4), p.579-94.

[The major critique of the proposals of Benjamin Graham and Frank D. Graham]

Benjamin Graham (1943) "The Critique of Commodity Reserve Currency: A point-by-point reply", Journal of Political Economy, Vol. 51 (1), p.66-9.

[Reply to Beale, Kennedy and Winn]

Frank D. Graham (1943) "Commodity Reserve Currency: A criticism of the critique", Journal of Political Economy, Vol. 51 (1), p.70-5.

[Reply to Beale, Kennedy and Winn]

Willis J. Winn (1943) "Commodity Reserve Currency: A rejoinder", Journal of Political Economy, Vol. 51 (2), p.175-7.

[Rejoinder to B.Graham and F.Graham]

Friedrich A. Hayek (1943) "A Commodity Reserve Currency", Economic Journal, Vol. 53, No. 210, p.176-84. Reprinted in F.A. Hayek, 1948, Individualism and Economic Order. Chicago: University of Chicago Press.

[Discusses and advocates adoption of international commodity reserve currency standard - stressing the "international" aspect in particular.]

John Maynard Keynes (1943) "The Objective of Price Stability", Economic Journal, Vol. 53, No. 210, p.185-7.

[Critique of Hayek]

Frank D. Graham (1944) "Keynes versus Hayek on a Commodity Reserve Currency", Economic Journal, Vol. 54, December, p.422-9.

John Maynard Keynes (1944) "A Rejoinder to Professor Graham", Economic Journal, Vol. 54, December, p.429-30.

Benjamin Graham (1944) World Commodities and World Currency. New York: McGraw-Hill.

Robert M. Weidenhammer (1944) "Review of Herbert Feis's Sinews of Peace and Benjamin Graham's World Commodities and World Currency", American Economic Review, Vol. 34 (4), p.925-8.

Henry C. Simons (1945) "Review of Benjamin Graham's World Commodities and World Currency", Journal of Political Economy, Vol. 53 (3), p.279-81.

[Commends Graham's scheme, but argues that it needs to be placed in a wider fiscal-monetary context.]

Joseph C. Frommer (1945) "A Price Formula for Multiple-Commodity Monetary Reserve", Econometrica, Vol. 13 (2), p.153-60.

Friedrich A. Hayek (1945) "Review of Frank Graham's Social Goals and Economic Institutions", Journal of Political Economy, Vol. 53 (2), p.177-9.

Frank D. Graham (1946) "Full Employment without Public Debt, without Taxation, without Public Works and without Inflation", in Frank D. Graham and Abba P. Lerner, editors, Planning and Paying for Full Employment. Princeton: Princeton University Press.

[Frank Graham changes his proposals slightly. Suggests establishment of "Federal Reserve Corporation" (a Fed for commodities) using private sector as agents. See Lerner's interesting comments and Lerner's own paper (similar mechanism for different purpose).]

Benjamin Graham (1947) "Money as Pure Commodity", American Economic Review, Vol. 37 (2), p.304-17.

[Benjamin Graham sets his commodity reserve currency proposition in historical context]

C.D. Calsoyas (1948) "Commodity Currency and Commodity Storage", 1948, American Economic Review, Vol. 38 (3), p.341-52.

[Review of the monetary-theoretic implications of a commodity reserve currency concept]

Alex Rosensen (1948) "International Commodity Reserve Standard Reconsidered", Review of Economics and Statistics, Vol. 30 (2), p.135-40.

[Post-Bretton Woods call for the necessity of commodity reserve currency to supplement the IMF]

Evsey Domar (1948) "Review of Graham and Lerner, Planning and Paying for Full Employment", American Economic Review, Vol. 38 (4), p.666-70.

[Argues that Graham's plan has political difficulties. Better for England than US.]

M.K. Bennett et al. (1949) Commodity Stockpiling as an Economic Stabilizer. Stanford: Stanford University Press.

[Empirical/applied study of the viability of commodity storage schemes]

Lloyd W. Mints (1950) Monetary Policy for a Competitive Society. New York: McGraw-Hill.

[Critique of Graham?]

Milton Friedman (1951) "Commodity Reserve Currency", Journal of Political Economy, Vol. 59, June, p.203-32. Reprinted in M. Friedman, 1953, Essays in Positive Economics. Chicago: University of Chicago Press.

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(C) Post-1940s Commodity Reserve Currency Proposals

Elmer M. Harmon (1959) Commodity Reserve Currency. New York: Columbia University Press.

Albert G. Hart, Nicholas Kaldor and Jan Tinbergen (1963) The Case for an International Commodity Reserve Currency. Geneva: UNCTAD. Reprinted in N. Kaldor, 1964, Essays on Economic Policy II: Vol. IV of Collected Economic Essays of Nicholas Kaldor. 1980 edition, New York: Holmes and Meier.

[Kaldor's main paper on commodity reserve currency - i.e. "bancor". Have (1) IMF issue bancor convertible to gold and bundle of commodities (30 goods); (2) bancor fully covered by commodities and gold with only a small fixed percentage being fiduciary issue; (3) only Central Banks can hold bancor balances with the IMF; (4) recommended initial issue of $30bn, of which $5bn by gold, $20bn by commodities and $5bn fiduciary. There is a single buffer stock for a bundle of commodities in fixed proportions. Argued that benefit is that it stops falling primary commodities prices from depressing industrial demand and thus reducing demand for manufactured goods and fall in scale of world investment in primary sector.]

H.G. Grubel (1966) "The Case Against an International Commodity Reserve Currency", Oxford Economic Papers, Vol. 17.

[Critique of Kaldor at al. - arguing that cost of buffer stock scheme would be 6% of the value of stock per year (against Kaldor's initial estimate of 3-3.5% per year)]

Albert G. Hart (1966) "The Case For and Against an International Commodity Reserve Currency", Oxford Economic Papers, Vol. 18, July.

[Defense of Kaldor et al. against Grubel.]

Jean de Largentaye (1967) "L'Etalon Marchandise", Economie Appliquee, September.

[Independent version of Kaldor's scheme by French translator of Keynes's General Theory and top official of the IMF]

Fisher Black (1970) "Banking and Interest Rates in a World Without Money: The effects of uncontrolled banking", Journal of Bank Research, Vol. 1, p.9-20.

[Argues that a basket of securities is what backs currency]

Nicholas Kaldor (1974) "International Monetary Reform: The need for a new approach", Bancaria. As translated in N. Kaldor, 1978, Further Essays on Applied Economics: Vol. VI of Collected Economic Essays of Nicholas Kaldor. New York: Holmes and Meier.

[Discusses the advantages of "bancor" - specifically comparing the differential effects of oil crisis and harvest failures on rich and poor countries respectively.]

Jon C. Luke (1975) "Inflation-Free Pricing Rules for a Generalized Commodity Reserve Currency", Journal of Political Economy, Vol. 83 (4), p.779-90.

[Mathematical treatment of CRC and derivation of "pricing rules" of commodity bundle to get price stability. More flexible version of early CRC literature.]

Nicholas Kaldor (1975) "Preface" to L. St Clare Grondona, Economic Stability is Possible. Hutchinson Benham.

Nicholas Kaldor (1976) "Inflation and Recession in the World Economy", Economic Journal. Reprinted in Kaldor, 1978, Further Essays on Economic Theory: Vol. V of Collected Economic Essays of Nicholas Kaldor. New York: Holmes and Meier.

[Reiterate call for Bancor. Discusses costs of price instability and slow adjustment to long run equilibrium. Thus, it is important to anchor prices into "normal prices" (via bancor) and thus make for more general and faster stability.]

Eugene F. Fama (1980) "Banking in the Theory of Finance", Journal of Monetary Economics, Vol. 6, p.39-57.

[Argues that any commodity can back a currency in a Free Banking world]

Robert E. Hall (1982) "Monetary Trends in the United States and the United Kingdom: A review from the perspective of new developments in monetary economics", Journal of Economic Literature, Vol. 20, p.1552-56.

Robert E. Hall (1982) "Explorations in the Gold Standard and Related Policies for Stabilizing the Dollar", in R.E. Hall, editor, Inflation: Causes and effects, p.111-22. Chicago: University of Chicago Press.

[Argues for a commodity-backing of currency]

Robert L. Greenfield and Leland B. Yeager (1983) "A Laissez-Faire Approach to Monetary Stability", Journal of Money, Credit and Banking, Vol. 15 (3), p.302-15.

[Argue for commodity-reserve currency in a Free Banking world]

Nicholas Kaldor (1983) "The Role of Commodity Prices in Economic Recovery", Lloyds' Bank Review, July. Also World Development, 1987. Repinted in N. Kaldor, 1989, Further Essays on Economic Theory and Policy: Vol. IX of Collected Economic Essays of Nicholas Kaldor. New York: Holmes and Meier.

[Calling again for bancor scheme, although now called for individual buffer stocks for various commodities (to distinguish and counter independent movements in commodity prices like the oil shock). Also discusses the productivity-enhancing role of the price stabilization enabled by such a scheme. Also discusses the stagflationary effects of primary product price changes.]

Lawrence H. White (1984) "Competitive Payments Systems and the Unit of Account", American Economic Review, Vol. 74 (4), p.699-712. Reprinted in L.H. White, 1989, Competition and Currency: Essays on free banking and money. New York: New York University Press.

[Critique of Greenfield and Yeager. Supports Free Banking, but argues against commodity-reserve. Similar to Friedman's 1951 argument]

Robert L. Greenfield and Leland B. Yeager (1986) "Competitive Payments Systems: Comment", American Economic Review, Vol. 76, p.848-49.

[Reply to White]

Lawrence H. White (1986) "Competitive Payments Systems: Reply", American Economic Review, Vol. 76 (4). Reprinted in L.H. White, 1989, Competition and Currency: Essays on free banking and money. New York: New York University Press.


Gerald P. O'Driscoll (1986) "Money, Deregulation and the Business Cycle", Cato Journal, Fall, p.587-605. Reprinted in J.A. Dorn and A.J. Schwartz, 1987, editors, The Search for Stable Money: Essays on monetary reform. Chicago: University of Chicago Press.

[Review of the commodity-reserve currency in a Free Banking system in light of the "legal restrictions" theory of money.]


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(A) Welfare Effects of Price Stabilization: Theory

F.V. Waugh (1944) "Does the Consumer Benefit from Price Instability?", Quarterly Journal of Economics, Vol. 58, p.602-14.

W.Y. Oi (1961) "The Desirability of Price Instability under Perfect Competition", Econometrica, Vol. 29, p.58-64.

B.F. Massell (1969) "Price Stabilization and Welfare", Quarterly Journal of Economics, Vol. 83, p.284-98.

B.F. Massell (1970) "Some Welfare Implications of International Price Stabilization", Journal of Political Economy, Vol. 78, p.404-17.

Paul A. Samuelson (1972) "The Consumer Does Benefit from Feasible Price Stability", Quarterly Journal of Economics, Vol. 86, p.476-96.

Maurice D. Levi (1975) "Buffer Stocks, Aggregate Activity, and Economic Policy", Economic Inquiry, 13(1), March 1975, pages 71-80.

David M.G. Newbery and Joseph E. Stiglitz (1979) "The Theory of Commodity Price Stabilization Rules: Welfare impacts and supply responses", Economic Journal, Vol. 89, p.799-817.

Harry G. Johnson (1977) "The Elementary Economic Geometry of Buffer Stock Price Stabilization", Malayan Economic Review, 22(1), April 1977, pages 1-9.

Hans H. Glismann and Horst Rodemer (1979) "Wohlfahrtseffekte von Bufferstocks zur Glattung von Preisschwankungen auf den Weltrohstoffmarkten. (Welfare Effects of Buffer Stocks for Stabilizing Price Fluctuations on World Raw Material Markets)", Weltwirtschaftliches Archiv, 115(3), 1979, pages 467-84.

David M.G. Newbery and Joseph E. Stiglitz (1981) The Theory of Commodity Price Stabilization: A study in the economics of risk. Oxford: Clarendon.

Brian D. Wright and Jeffrey C. Williams (1984) "The Incidence of Market-Stabilizing Price Support Schemes", Yale Economic Growth Center Discussion Paper: 466, December 1984, pages 39.

[This paper considers schemes using floor prices or deficiency payments for market stabilization. Many results can be derived analytically for the conventional comparative statics approach. But the incidence of the scheme is a dynamic problem which requires numerical solution. The incidence on producers consists of a one-time wealth change, the sign and strength of which depends on the curvature of consumption demand, the source of the market disturbance, the level of support and the elasticity of supply. Commodity destruction can dominate a buffer stock, and deficiency payments are most attractive when the source of disturbance is exogenous to the domestic market.]

G.C. Van Kooten, Andrew Schmitz and W.H. Furtan, W. H. (1988) "The Economics of Storing a Non-storable Commodity", Canadian Journal of Economics; 21(3), August 1988, pages 579-86.

[Commodity stabilization under a buffer stock and under a buffer fund are compared. In the case where a good cannot be physically stored, stability brought about by a buffer fund scheme cannot result in a net welfare improvement for society. When instability is due only to demand variability, there are no gainers or losers; when instability is due to supply variability, a buffer fund does not result in a welfare loss to society, but there is a transfer of income from taxpayers to producers. Hence, producer arguments for a buffer fund are a desire for a redistribution of income in their favor.]

David M.G. Newbery (1989) "The Theory of Food Price Stabilisation" Economic Journal, 99(398), December 1989, pages 1065-82.

[Food price instability has important effects on consumers, which have been largely ignored in the literature on commodity price instability. This paper discusses these differences, and argues that distribution issues are central and that futures markets are not well designed to provide consumer insurance. The competitive market will undertake too little price stabilization, but a universal ration entitlement, which would act as a substitute for futures markets, would provide more cost-effective insurance. If the coverage of ration entitlements is incomplete, however, providing increased price stabilization by additional buffer stocks may be more cost effective than rations.]

John Spraos (1989) "Income Transfers and Income Stability Under Alternative Schemes for Coping with Commodity Price Fluctuations: A Unified Diagrammatic Exposition", University College London Discussion Paper: 89-10, 1989, pages 24.

[A first attempt at a systematic analysis of a multilateral guarantee scheme is combined with a treatment, similar in scope and homogeneous in exposition, of a buffer stock scheme. The income transfer and income stability consequences of both schemes are derived and compared.]


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(B) Buffer Stocks and Private Incentives

William Poole (1970) "McKinnon on Futures Markets and Buffer Stocks", Journal of Political Economy, Vol. 78 (5) Sept.-Oct. 1970, pages 1185-90.

R.I. McKinnon (1971) "Futures Markets and Buffer Stocks: A Reply to William Poole", Journal of Political Economy; 79(2), March-April 1971, pages 351-55.

Paul Hallwood (1977) "Interactions between Private Speculation and Buffer Stock Agencies in Commodity Stabilization", World Development, 5(4), April 1977, pages 349-53.

Anne E. Peck (1977-8) "Implications of Private Storage of Grains for Buffer Stock Schemes to Stabilize Prices", Food Research Institute Studies, 16(3), 1977-78, pages 125-40.

Shigeru Akiyama and Masahiro Kawai (1985) "Welfare Implications of Commodity Price Stabilization with Partially Flexible Production, Private Storage and Buffer-Stock Costs", Weltwirtschaftliches Archiv, 121(2), 1985, pages 261-79.

[The paper extends the traditional Waugh-Oi-Massell literature of commodity price stabilization to rational expectations model that includes (a) partially flexible production; (b) competitive private storage; and (c) the authorities' costs of buffer-stock operations. Price stabilization improves each group's welfare with respect to its own disturbances, and reduces welfare with respect to disturbances impinging on other groups' demand or supply. The private sector as a whole gains unambiguously from price stability, while the stabilization authorities always lose. Price stabilization might make the overall society (i.e., the private and official sectors) better off for a while, but should eventually generate a social potential-welfare loss.]

Marsha Courchane and David Nickerson (1986) "Optimal Buffer Stock and Futures Market Policies for Commodity Price Stabilization", Duke Working Paper in Economics: 86-12, January 1986, pages 43.

[Economic evaluations of policies of public intervention in private market exchange often proceed from a presumption that the allocation of resources provided by private markets is approximately competitive and so Pareto efficient. Public interference in such markets can be justified only if a significant "market failure" occurs. Observations of substantial volatility in the prices of primary commodities over time has often been cited as evidence that exchange in markets for such commodities is not Pareto efficient and that public redistributive policies can be designed so as to promote the stability of income to participants in these markets and improve their welfare. Both the efficiency of such policies and their welfare implications have been studied under a variety of assumptions regarding the preferences and technologies of market participants, the nature of stochastic disturbances to market equilibria, the role of information available to market participants, and the partial or general nature of the equilibrium in the model under study. A pervasive source of market failure in the exchange of most primary commodities is the absence of a complete set of markets for risk. When market participants engage in activities characterized by uncertainty, the optimality of market equilibria cannot be supported when the risk borne by each participant cannot be reallocated through private exchange. The existence and nature of public policies promoting income stability to market participants when risk cannot be reallocated through private exchange are the concern of this paper. Three types of policies are studied. First, a market in one-period futures contracts is established to allow market participants to stabilize their income by privately reallocating their risk. Second, a policy of direct intervention in the commodity market through operation of a commodity buffer stock is studied, when agents have no opportunity to engage in futures exchange. Third, a policy of indirect intervention in the commodity market through public speculation in the futures market is studied. The market environment within which such policies are studied is characterized by the following qualities: (1) equilibrium is restricted to a single market, (2) the commodity exchanged is durable, (3) three classes of competitive agents comprise the market: consumers, producers, and inventory-holding speculators, (4) producers and speculators operate under price uncertainty and exhibit a constant aversion to risk, (5) the activity of each class of agents is a source of stochastic disturbance to market equilibrium, (6) producers and speculators form rational expectations of the relevant moments of the commodity price distribution, and (7) policies of intervention in either the commodity or futures markets are conducted according to linear feedback rules based on the same amount of market information available to producers and speculators.

Christopher L. Gilbert (1988) "Buffer Stocks, Hedging and Risk Reduction", Bulletin of Economic Research, 40(4), October 1988, pages 271-86.

[There is a close correspondence between buffer stock stabilization of primary commodity prices and hedging strategies using futures or options markets. In particular, bandwidth stabilization, employed in most buffer stock agreements, closely resembles the strategy obtained by purchasing a put option and writing a call option at prices symmetrically below and above the central price. This suggests that the choice between hedging and stabilization should depend less on the properties of hedged and stabilized revenues under ideal conditions than on the implications of departures from these conditions.]

John McLaren (1992) "Speculative Equilibrium of "Managed" Primary Commodity Markets" Columbia University Department of Economics Discussion Paper 624, September 1992, pages 31.

[This paper sets up a model of commodity speculation in the presence of a public buffer stock intervention. Equilibrium is characterized, existence is proven and sufficient conditions for uniqueness are given. These take the form of the buffer stock having "marginal propensities to store" between zero and one. A limited policy neutrality result is proven, but where the buffer stock does have an effect, some strong contrasts with the laissez-faire case are established. For example, the equilibrium is not necessarily a constrained social optimum; a sufficient condition is given under which it is. Further, examples are given in which a putatively stabilizing buffer stock intervention actually creates a price bubble where otherwise none could exist.]

Mario J. Miranda and Joseph W. Glauber (1993) "Estimation of Dynamic Nonlinear Rational Expectations Models of Primary Commodity Markets with Private and Government Stockholding", Review of Economic Statistics, 75(3), August 1993, pages 463-70.

[Stochastic-dynamic programming and disequilibrium maximum likelihood methods are combined to estimate a dynamic nonlinear rational expectations model of a market for a storable primary commodity. The estimation model captures the inherently nonlinear structure of private stockholding dynamics, the disequilibrium effects of government buffer stock intervention, and the impact of price expectations and risk on private supply and stockholding decisions.]

Pulapre Balakrishnan and Bharat Ramaswami (1995) "Public Intervention and Private Speculation: The Case of Wheat Procurement", Journal of Quantitative Economics, 11(2), July 1995, pages 59-83.

[The paper examines the competition between public authorities and private speculators in a two period seasonal model where speculators decide on the quantity of grain to be stored from the first to the second season. Most government procurement of grain also occur in the first season. The equilibrium no-arbitrage condition suggests that private storage and hence the volume of procurement, is sensitive to market anticipations of public grain sales in the second season. If market expectations are conditioned on the volume of government stock, procurement is subject to speculative attacks. The implications of such speculative activity for market responses to exogenous shocks are examined in a theoretical model. The empirical model tests for the importance of speculative activity in explaining fluctuations in wheat procurement in India during the period 1970-1990. The results suggest that government has used its trade and buffer stocking strategies in a manner that has achieved credibility for its intervention.]

Wouter Zant (1997) "Stabilizing Prices in Commodity Markets: Price Bounds versus Private Stockholding", Journal of Policy Modeling, 19(3), June, p.253-77.

[The price stabilizing impact of private stockholding is compared with the price stabilizing impact of a centrally imposed band-width price policy (buffer stock) on the basis of monthly data of the Indian natural rubber market covering the period 1978-1991. The quantitative analysis reveals that the elasticity of speculative stock demand is three to four times higher without price policy. Simulated prices confirm the stabilizing impact of private stock behavior: the hypothesis that a band-width price policy is more effective in stabilizing prices than private stockholding cannot be confirmed.]

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(C) Buffer Stocks and International Trade

Nicholas Kaldor (1952) "A Reconsideration of the Economics of the International Wheat Agreement", Commodity Policy Studies, Rome: Food and Agriculture Organization. Reprinted in N. Kaldor, 1964, Essays on Economic Policy II: Vol. IV of Collected Economic Essays of Nicholas Kaldor. 1980 edition, New York: Holmes and Meier.

[Critical evaluation of international commodity price stabilization schemes]

Dennis H. Robertson (1952) "The Terms of Trade", in Utility and All That and Other Essays. London: Allen and Unwin.

[Scheme of primary product price stabilization by using buffer stocks.]

Michael D. Pelcovits (1979) "The Equivalence of Quotas and Buffer Stocks as Alternative Stabilization Policies", Journal of International Economics, 9(2), May 1979, pages 303-07.

D. Bigman and Shlomo Reutlinger (1979) "Food Price and Supply Stabilization: National Buffer Stocks and Trade Policies", American Journal of Agricultural Economics, 61(4), p.657-67.

Edward Tower (1981) "Buffer Stocks are Better Stabilizers Than Quotas" Journal of International Economics, 11(1), Feb. 1981, pages 113-15.

Alexander H. Sarris (1982) "Export Taxes versus Buffer Stocks as Optimal Export Policies under Uncertainty", Journal of Development Economics, 11(2), October 1982, pages 195-213.

Hermann Dick et al. (1982) "Indexation of UNCTAD Core Commodity Prices by Buffer Stocks or Export Quotas? A Comparison of the Benefits for Two Developing Economies", Journal of Development Economics, 11(3), December 1982, pages 379-401.

L. Berlage (1984) "Commodity Price Stabilization by Buffer Stocks and by Export Quotas", Tijdschrift voor Economie en Management, 29(3), 1984, pages 437-48.

Gordon Gemmill (1985) "Forward Contracts or International Buffer Stocks? A Study of Their Relative Efficiencies in Stabilising Commodity Export Earnings", Economic Journal, 95(378), June 1985, pages 400-417.

R. MacDonald (1985) "Buffer Stocks, Exchange Rates and Deviations from Purchasing Power Parity", Empirical Economics 10(3), 1985, pages 163-75.

S. Devadoss (1992) "Market Interventions, International Price Stabilization, and Welfare Implications" American Journal of Agricultural Economics; 74(2), May 1992, pages 281-90.

[The welfare effects of price stabilization are quantified under free trade and under distortionary policies when an exporting country protects domestic producers with price supports, an importing country pursues a price-fixing policy, and a second importing country follows a free-trade policy. Results show that distortionary interventions cause greater world price variability. World gains from international price stabilization through a costless buffer stock scheme are higher under distortionary trade than under free trade.]

David Bigman and Larry S. Karp (1993) "Strategic Trade Policies under Instability" International Review of Economics and Finance, 2(2), 1993, pages 163-79.

[Countries often use a host of policies, such as buffer stocks or variable levies, in order to stabilize their own market or protect themselves against external instability. These policies may transfer domestic price instability to their trading partners. We study a two-country partial equilibrium model in which price variability, triggered by fluctuations in supply, provides the main motive for trade and for the application of approximate trade policies. While both countries are likely to gain from the stabilizing effects of free trade, the country that intervenes to regulate its trade may reap extra gains at the expense of its trading partner. This may lead, however, to an open "trade war" from which all countries may lose.]

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(D) Buffer Stocks and Economic Development

Nicholas Kaldor (1963) "Stabilizing the Terms of Trade of Underdeveloped Countries", UN Economic Bulletin for Latin America, March. Reprinted in N. Kaldor, 1964, Essays on Economic Policy II: Vol. IV of Collected Economic Essays of Nicholas Kaldor. 1980 edition, New York: Holmes and Meier.

[Multiple agreements on commodity price stabilization via buffer stocks as a way to stabilize terms of trade and help development]

Harry G. Johnson (1967) "Economic Policies Toward Less Developed Countries", Washington: Brookings.

[Attacks Kaldor's scheme on the basis that simple fiscal and monetery demand-management policies are cheaper and more efficient that commodity reserve schemes.]

Hallett Andre J. Hughes (1986) "Commodity Market Stabilisation and "North-South" Income Transfers: An Empirical Investigation", Centre for Economic Policy Research Discussion Paper: 98, April 1986, pages 33.

[Commodity stabilisation agreements have often been suggested as a means of stabilising producers' revenues and redistributing productive resources to less developed economies (from "North" to "South"). But no empirical estimates of how much may be expected from such agreements, nor of what they would cost to operate, have appeared. This paper examines, in the context of one market, how far prices can be stabilised by buffer stock interventions, the costs of that stabilisation, and whether any redistribution would be achieved. We find pure stabilisation leads to transfers away from the South, but that supply restrictions which force redistribution are extremely expensive. However it is relatively cheap to protect producers in the South against the uncertainty of future revenues.]

P.B.R. Hazell, M., Jaramillo and A.Williamson (1990) "The Relationship between World Price Instability and the Prices Farmers Receive in Developing Countries", Journal of Agricultural Economics; 41(2), May 1990, pages 227-41.

[World prices for agricultural commodities are traditionally unstable, but they were particularly turbulent during the late 1970s and early 1980s. This paper uses available post-War data on individual commodity prices to test whether world price instability is increasing, and to examine its impact on the prices producers receive in developing countries. It is found that the recent turbulences as more a statistical fluke than the beginning of any longer-term increase in market instability. Further, while the variability in world prices has been almost entirely transmitted to developing countries in the dollar value of their export unit values, it has not been fully transmitted to average producer prices. Real exchange rates, domestic marketing arrangement and government intervention have acted to buffer price movements for producers in many developing countries.]

Alfred Maizels (1992) Commodities in Crisis: The commodity crisis of the 1980s and the political economy of international commodity policies. World Institute for Development Economics Research, Studies in Development Economics. Oxford; New York; Toronto and Melbourne: Oxford University Press, Clarendon Press,1992.

[From Barry Bosworth's review in JEL March 1994:

This book is motivated by a striking collapse of international commodity prices in the 1980s. While the sharp rise of commodity prices in the early 1970s attracted a great deal of attention in the more-developed consuming nations, the extent of the reversal of the situation in the 1980s has gone almost unnoticed. Yet, between 1980 and 1987, the price of nonoil commodities fell by 45 percent relative to the price of manufactured products, and they have remained at this depressed level in subsequent years. The magnitude of the foreign exchange loss due to the change in the commodity terms of trade is estimated by the author at $21 billion for the commodity-dependent developing countries. For comparison purposes, the commodity exports of these 130 countries totaled $78 billion and total exports amounted to $158 billion. The terms of trade loss matched in magnitude the increase in debt service costs, which has attracted far more attention. The phenomena are even more surprising when evaluated against the backdrop of a gradual rise in the commodity terms of trade over the prior two decades.

These developments are used to introduce an extensive discussion of international commodity policy. The book devotes only a small amount of space to the question of why commodity prices fell so sharply, and the discussion is limited largely to a summary of research by others. Instead, the primary focus of this book is on international negotiations on commodity policies as reflected in calls for price-stabilizing agreements based on buffer stocks and export controls. This is a familiar agenda to those who remember the North-South negotiations of the 1970s and the calls for a "New International Economic Order," and the author is obviously a strong proponent. The strength of this book is the extensive review of past international negotiations over commodity policies and the strong political perspective that is introduced. Neoclassical economists, as advocates of open international markets, however, will not be favorably disposed toward the book's basic perspective. It does not attempt to introduce new analysis of why commodity markets behave as they do or why prices have declined so sharply over the past decade. While much of the discussion is oriented around commodity price stabilization, the author's clear objective is to raise the average level of prices received by commodity producers. It is this conflict between stabilization over the cycle and efforts to maintain prices above long-run equilibrium levels that destroyed past international buffer stock programs. Both consumers and producers have an interest in stabilization, but they have opposing interests with respect to the average level of prices. The book contains 15 chapters organized around four central subjects: (1) the current crisis and its impact on developing countries; (2) a historical review of international commodity policy; (3) longer-term issues involving the organization of commodity markets, the influence of technical change, and trade barriers of the developing countries; and (4) the future direction of international commodity policy.

Economists will find the discussion of prior negotiations on commodity policy interesting because of the political perspective that the book brings to the issue. The author is clearly sympathetic to the perspective of developing countries; but he gives inadequate consideration to the economic arguments of opponents to international commodity agreements, who question their feasibility. The review of prior proposals for governmental intervention in commodity markets and other forms of assistance is generally quite favorable. What is lacking, however, is any sense of a budgetary limit for developmental assistance, and a need to make choices. If the total funds for assistance are limited, does it make sense to allocate large portions through commodity programs; and, within the area of commodity markets programs, which proposals are most cost-effective?

The third section of the book on longer-term issues provides an interesting analysis of the influence of technical change on reducing the demand for natural materials. Furthermore, the author clearly demonstrates that industrialized countries have structured their tariffs to penalize efforts of the producing countries to diversify their exports by incorporating higher levels of processing prior to export. Tariffs and the frequency of nontariff barriers are far greater for processed than for primary commodities.

I found the final section on the future of international commodity policy of limited value. Many of the specific proposals, such as reducing tariffs on agricultural products, partial debt relief, and expanded development aiding to the poorest countries, would have widespread support; and others seem quite benign, even if of limited effect. The author, however, provides a highly political, conspiratorial, and, I believe, skewed interpretation of the source of industrial country opposition to negotiations aimed at raising the level of commodity prices.]

Alfred Maizels (1994) "The Continuing Commodity Crisis of Developing Countries", World Development 22(11), November 1994, pages 1685-95.

[Since the early 1980s the dominant feature of the international commodity markets has been a sharp downtrend in prices, though short-term instability has also remained excessively high for many commodities. International policy should therefore be focused on supply management to raise depressed levels of commodity prices. The problem of short-term commodity price instability is best tackled by a series of international buffer stocks, rather than by hedging on the financial markets, a technique which has serious limitations for exporters in developing countries.]

Imre Ferto (1995) "Methods for Stabilizing Agricultural Prices in Developing Countries", Acta Oeconomica, 47(1-2), pages 155-69.

[Price stabilization is one of the most important objectives of agricultural policy. Different methods of price stabilization (buffer stocks, floor-ceiling prices, buffer funds, export/import taxes and subsidies) can be observed in their purest form in developing countries. The most important lesson from the experiences of developing countries for transforming Eastern-European agricultural systems is that, given an underdeveloped system of agricultural trade and finance, market-building by the state cannot be restricted to creating legal frameworks. The government can regulate efficiently only well-functioning markets.]

Nurul Islam (1996) "Instability in World Food Prices in the Post-Uruguay Round Situation: Prospects and Policy Issues", Asia Pacific Development Journal, 3(2), December 1996, pages 1-10.

[The prices in world cereal markets are highly volatile, with adverse impact on the poor in developing countries, who spend 40-50 per cent of their income on cereals. Following the Uruguay Round of trade liberalization, price instability is likely to persist even though the burden of adjustment to supply fluctuations will be shared widely among all trading nations and domestic markets will be less insulated. As a result of a fall in food supplies caused by a reduction in price support programmes, the world cereal stocks that tended to act as a cushion or buffer to absorb supply fluctuations will fall. Under the circumstances, to deal with the impact of price instability on poor countries, what is needed is international agreement to ensure adequate stocks as well as food aid or financial facility at times of high cereal prices as well as national measures to moderate high price instability without seriously jeopardizing commitment to a liberal regime.]

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(E) Implementation and Evaluation of Buffer Stock Schemes

(see also Bennett et al. (1949) above)

R.L. Gustafson (1958) Carryover Levels for Grains, US Dept of Agriculture, Technical Bulletin No. 1178.

UNCTAD (1974) "An Integrated Programme for Commodities", TD/B/C.1/166, Trade and Development Board, Committee on Commodities, Geneva, UNCTAD.

UNCTAD (1975a) "Compensatory Financing of Export Fluctuations", TD/B/C.1/195, Trade and Development Board, Committee on Commodities, Geneva, UNCTAD.

UNCTAD (1975b) "Second Progress report on Storage Costs and Warehouse Facilities", TD/B/C.1/198, Trade and Development Board, Committee on Commodities, Geneva, UNCTAD.

Shlomo Reutlinger (1976) "A Simulation Model for Evaluation Worldwide Buffer Stocks of Wheat", American Journal of Agricultural Economics, Vol. 58 (1), p.1-12.

World Bank (1977) "Commodity Price Stabilization and Developing Countries: the problem of choice", by E.M. Brook, E.R. Grilli and J. Waelbrook, Staff Working Paper No. 262, Washington, DC: World Bank.

J.R. Behrman (1977) International Commodity Agreements. Washington DC: Overseas Development Council.

J.P. Stein, J.P. and R.T. Smith (1977) "The Economics of the United States Grain Stock Policy", Rand Corporation, R-1861-CIEP, March.

Louis M. Goreaux (1978) "The Use of Buffer Stocks" Finance and Development, 15(4), Dec. 1978, pages 23-27.

L.M. Goreaux (1978) "Optimal Rule of Buffer Stock Intervention", World Bank

F.G. Adams and S.A. Klein (1978) Stabilising World Commodity Markets. Lexington: Heath.

Walter C. Labys (1979) " The Determination of Optimum Buffer Stock Intervention Rules", Journal of Development Studies 15(3), April 1979, pages 154-66.

B.L. Gardner (1979) Optimal Stockpiling of Grain. Lexington: D.C. Heath.

R.T. Edwards and C.P. Hallwood "The Determination of Optimum Buffer Stock Intervention Rules", Quarterly Journal of Economics, 94(1), Feb. 1980, pages 151-66.

Daniel J. Seidmann. (1985) "Target Buffer Stocks", European Economic Review 27(2), March 1985, pages 165-82.

Vladimir Dolenc (1985) "Optimal Price Policy of Buffer Stocks", Zeitschrift fur die gesamte Staatswissenschaft (JITE); 141(3), September 1985, pages 401-12.

Joseph Glauber, Peter Helmberger and Mario Miranda (1989) "Four Approaches to Commodity Market Stabilization: A Comparative Analysis" American Journal of Agricultural Economics, 71(2), May 1989, pages 326-37.

[The effects of four alternative price stabilization programs for soybeans are compared using a rational expectations model and simulation. For a given government expenditure, subsidized private storage is the most efficient way to stabilize market price. For a given deadweight loss, a program of direct payments is the most efficient stabilizer of the effective farm price; this program does not stabilize market price. All four programs, including a buffer stock program and one involving both direct payments and buffer stocks, tend to destabilize quasi-rent. Programs that involve an initial build-up of stock increase producer benefits and hurt consumers.]

John Spriggs and G.C. Van Kooten (1990) "Buffer Fund Price Stabilization under Rational Expectations: Policy Simulation in an Artificial Market" Canadian Journal of Agricultural Economics, 38(2), July 1990, pages 279-93.

Jeffrey C. Williams and Brian D. Wright (1991) Storage and Commodity Markets. Cambridge: Cambridge University Press.

[Concerned with how the capability to store a surplus affects the prices and production of commodities. Focus on the behavior over time of aggregate stockpiles provides insights into such questions as how much a country should store out of its current supply of food considering the uncertainty of future harvests. Related topics covered include whether storage or international trade is a more effective buffer and whether stockpiles are more useful in raw or processed form.]

Irma Adelman and Peter Berck (1991) "Financial Considerations of Public Inventory Holdings in Developing Countries" University of California at Berkeley Department of Agricultural and Resource Economics (CUDARE) Working Paper: 588, March 1991, pages 21.

[Food-security enhancing buffer stocks are usually analyzed as projects, to be compared to other feasible projects, but they are also assets like stocks and bonds and can be compared to other feasible assets, while projects can only be compared to specified alternatives, including of course, the no action alternative. The theory of finance accounts for risk in a very general setting, while projects are typically evaluated for risk on the basis of stochastic simulations. Thus the assets market view of food stocks provides a powerful new tool of food-security analysis. In this paper, we propose a much simpler and theoretically better justified exercise - the evaluation of a buffer stock as a financial asset.]

Richard E. Just and Nancy Bockstael (1991), eds., Commodity and resource policies in agricultural systems. Agricultural Management and Economics series, New York; Berlin; London and Tokyo: Springer, 1991, pages xvii, 387.

[Nineteen papers examine commodity and resource policies in agricultural systems. Contributions focus on the problems confronting the joint formulation of commercial agricultural and resource policies; the evolution and coordination of U.S. commodity and resource policies; state regulations for agricultural chemical use; policy failures arising from multiple jurisdictions; the effects of commodity program structure on resource use and the environment; the redistribution of income through commodity and resource policy; sequential coordination of agricultural and resource policy; information issues in the coordination of agricultural and resource policy; joint management of buffer stocks for water and commodities; economy and climate; the effects of the feedgrain and wheat programs on irrigation and groundwater depletion in Nebraska; water policy effects on crop production; tradeoffs between agricultural and chemical policies; the effects of commodity programs on resource use; best management practices versus socially optimal practices; agriculture and fisheries; agricultural policies and health regulation; air pollution and agriculture; and the significance of the interaction of agricultural and resource policy. Contributors are mainly economists. Contributors are mainly economists. Just and Bockstael are at the University of Maryland. Author and subject indexes.]

Robert D. Reinsel (1993), ed. Managing food security in unregulated markets. Boulder and Oxford: Westview Press, 1993, pages x, 115.

[Seven papers identify and explore a range of views on the possibilities for international stocks management, and determine what might be compatible with the free market. Papers focus on international stocks management in unregulated markets; cereal stocks and production variability in a liberalized world trade environment; implications of grain trade liberalization for LDC food security; Australia's experience with its wool buffer stock scheme; Canadian experience with and reliance on income security and stabilization measures; stabilizing imported food prices for small developing countries; and government grain storage. Contributors are mainly economists. Reinsel is Senior Economist with the Agriculture and Trade Analysis Division of the Economic Research Service, United States Department of Agriculture. No index.]

Alfred Maizels and Theodosius B. Palaskas (1995) "The Common Fund and the Behaviour of the Ten "Core" Commodity Prices", UNCTAD-Review 0(0), pages 177-88.

[The UNCTAD proposal for a Common Fund to finance a series of international buffer stocks for major traded commodities had as one of the assumptions that the prices of different commodities did not always rise and fall at the same time. The present study tests this assumption, using recently developed co-integration techniques for eight of the ten "core" commodities specified in the UNCTAD Integrated Programme for Commodities. While it was found that the majority of pairs of prices of those commodities do move together in the long run, the analysis shows that in the short run (especially in the case of monthly and quarterly movements) the UNCTAD assumption was strongly supported. Thus, if the "First Window" of the Common Fund became operative, it could indeed economize on the use of financial resources by borrowing from some commodity agreements and lending to others.]


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(F) Specific Schemes, Buffer Funds and Unclassified

A.C. Lewis (1970) "A Note on Hidden Gains and Losses of Buffer Stock Schemes for Wool", Australian Journal of Agricultural Economics, 14(1), June 1970, pages 72-76.

C.P. Brown (1974) "International Commodity Control through National Buffer Stocks: A Case Study of Natural Rubber", Journal of Development Studies, 10(2), Jan. 1974, pages 188-212.

Kevin A. Parton (1978) "An Appraisal of a Buffer Fund Scheme for Beef", Australian Journal of Agricultural Economics 22(1), April 1978, pages 54-66.

Sadiq Ahmed (1978) "Should Bangladesh Participate in an International Buffer Stocking Arrangement for Raw Jute?", Bangladesh Development Studies, 6(1), Winter 1978, pages 71-90.

John O.S. Kennedy (1979) "Optimal Buffer Stock Policies for Wheat at the World Level" Australian Journal of Agricultural Economics, 23(3), Dec. 1979, pages 163-75.

A.C. Zwart and K.D. Meilke (1979) "The Influence of Domestic Pricing Policies and Buffer Stocks on Price Stability in the World Wheat Industry" American Journal of Agricultural Economics, 61(3), Aug. 1979, pages 434-47.

John C. Quiggin and Jock R. Anderson (1981) "Price Bands and Buffer Funds", Economic Record, 57(156), March 1981, pages 67-73.

F.G. Adams, J.R. Behrman and M. Lasaga (1981) "Commodity Exports and NIEO Proposals for Buffer Stocks and Compensatory Finance: Implications for Latin America", Quarterly Review of Economics and Business, 21(2), Sum. 1981, pages 48-76.

Sultan Hafez Rahman (1981) "Simulation of an Econometric Model to Analyze the Impact of a Buffer Stock Scheme in the Bangladesh Jute Sector", Bangladesh Development Studies, 9(4), Autumn 1981, pages 1-33.

Bruce L. Dixon and Wu-Hsiung Chen (1982) "A Stochastic Control Approach to Buffer Stock Management in the Taiwan Rice Market", Journal of Development Economics, 10(2), April 1982, pages 187-207.

Peter A. Cornelisse and Bart Kuijpers (1985) "On the Optimal Size of a Buffer Stock--The Case of Wheat in Pakistan", Pakistan Development Review, 24(3/4), Autumn-Winter 1985, pages 335-46.

Phil Simmons (1988) "A Theoretical Discussion of the Economic Effects of Buffer Stocks and Buffer Funds", Australian Journal of Agricultural Economics, 32(2-3), Aug.-Dec. 1988, pages 129-41.

Mike Hinchy and Brian S. Fisher (1988) "Benefits from Price Stabilization to Producers and Processors: The Australian Buffer-Stock Scheme for Wool", American Journal of Agricultural Economics, 70(3), August 1988, pages 604-15.

[In much of the stabilization literature, emphasis has been placed on the impact of stabilization schemes on producers. However, such schemes may also have significant implications for processors and consumers. In this paper, the Newbery and Stiglitz (1981) approach is extended to demonstrate the effects of both demand and supply instability using the Australian buffer-stock scheme for wool as a case study. It is shown that both producers and processors are likely to gain from price stabilization.]

Kees Burger and Hidde P. Smit (1989) "Long-term and Short-term Analysis of the Natural Rubber Market", Weltwirtschaftliches Archiv; 125(4), 1989, pages 718-47.

[A quarterly model of the market for natural rubber and long-term vintage models of supply of natural rubber and demand for all rubber are used to assess the viability of the bufferstocking arrangement under the International Natural Rubber Agreement. Its effect has been to increase producers' revenues by up to 20 percent in some quarters; but now that all the buffer stock has been sold, consumers have benefited more. The agreement cannot counter the impact of overall commodity price changes. Various scenarios for the rest of the century imply a slight fall in natural rubber prices.]

Thomas C. Pinckney (1989) "The demand for public storage of wheat in Pakistan" Research Report, no. 77, Washington, D.C.: International Food Policy Research Institute, 1989, pages 110.

[Estimates the total demand for governmental storage of wheat in Pakistan by separately analyzing interannual supply requirements, seasonal supply requirements, and import buffer requirements. Briefly describes Pakistan's wheat economy, the prospects for future growth of supply and demand, and the historical instability of wheat production in Pakistan. Provides insights into the nature of efficient storage, trade, and price policies; measures the tradeoffs between interannual price variability and fiscal cost, and between the seasonal price spread and fiscal cost; and estimates the minimum amount of stock that should trigger imports month by month. Combines the three components of the demand for storage to calculate total demand. Discusses the policy implications of the analysis and the implications for other countries. Pinckney is Assistant Professor of Economics at Williams College. Bibliography; no index.]

Takamasa Akiyama and Panayotis N. Varangis (1990) "The Impact of the International Coffee Agreement on Producing Company" World Bank Economic Review 4(2), May 1990, pages 157-73.

[Simulations of a global coffee model incorporating a vintage capital approach to production are run. Over the recent period of operation of the International Coffee Agreement's export quota system, the authors find that the quota system had a stabilizing effect on world coffee prices. The quotas reduced real export revenues for most small exporting countries, but large producers gained. Most small countries gained, however, in terms of risk reduction. If a brief suspension of the quota occurs from time to time, caused, for example, by adverse weather which results in a shortfall in world supply, the quota system works like a buffer stock scheme; on average, producing countries as a whole lose transfer benefits but gain risk benefits.]

John McLaren (1990) "Balance of Payments Volatility and Food Security: The "Portfolio" Approach Applied to Ghana and Tanzania", Eastern Africa Economic Review, 6(2), 1990, pages 95-109.

[Food security in macroeconomic terms is largely a matter of portfolio balance. A key variable is the supply of foreign exchange net of needed food imports; lack of effective international financial arrangements or cheap buffer stocks, a high mean and low variance for this variable will help in providing a decent and reliable food supply, and these depend on the "portfolio" of crops grown. This paper presents empirical techniques for studying the effects of "portfolio" choices and the "portfolio" effects of policy changes. The techniques are applied to Ghana and Tanzania, with results which show little benefit from export diversification and little desirability for self-sufficiency.]

Peter J.M. Cooper, and Elizabeth Bailey (1991) "Livestock in Mediterranean Farming Systems: A Traditional Buffer against Uncertainty Is Now a Threat to the Agricultural Resource Base" in D. Holden, P. Hazell and A. Pritchard, eds., Risk in agriculture: Proceedings of the tenth agriculture sector symposium. Washington, D.C.: World Bank, 1991, pages 81-120.

Richard E. Just, Erik Lichtenberg and David Zilberman, (1991) "Joint Management of Buffer Stocks for Water and Commodities" in R.E. Just and Nancy Bockstael, eds. Commodity and resource policies in agricultural systems. Agricultural Management and Economics series, New York; Berlin; London and Tokyo: Springer, 1991, pages 173-95.

Cameron, D. Lynne and Spriggs, John (1991) "International Effects of Canada's Western Grain Stabilization Program", Western Journal of Agricultural Economics, 16(2), December 1991, pages 435-45.

[Canada's Western Grain Stabilization Program is analyzed to determine the extent to which it acts as a buffer between the Canadian grains economy and the international grains economy. A dynamic stochastic simulation model is constructed to examine how Canada's Western Grain Stabilization Program modifies the transmission of: (1) domestic yield variability to the foreign grain market and (2) foreign demand variability to the domestic grains market. With respect to (1), the program was found to aggravate international uncertainty only very slightly while with respect to (2) it was found to substantially reduce domestic uncertainty.]

Brian Moir and Roley Piggott (1991) "Combinations of Buffer-Stocks and Buffer-Funds for Wool Price Stabilisation in Australia", Australian Journal of Agricultural Economics 35(1), April 1991, pages 77-89.

[In this paper a preliminary analysis is presented of a combined buffer-fund and buffer-stock as an alternative to a pure buffer-fund or to the Reserve Price Scheme (buffer-stock). The alternatives analyzed are designed so that each provides the same prices to producers as did the Reserve Price Scheme over the period of analysis. Least-cost combinations of policy instruments are derived. The results show that there is considerable potential for cost savings to be made by combining buffer-fund and buffer-stock instruments.]

Basil S. Yamey (1992) "The Tin Crisis (1985-86) and Futures Trading", Economic-Record, 0(0), Supplement, 1992, pages 10-15.

[A succession of six international tin agreements operated from 1956 to 1985. Futures trading in tin continued in London until the buffer stock scheme, without cash or the support of its sponsoring governments, collapsed in October 1985. The implications of the tin experience for futures trading and for so-called commodity stabilization schemes are examined.]

H. Don, B.H. Gunasekera and Brian S. Fisher (1992) "Australia's Recent Experience with the Collapse of Its Wool Buffer Stock Scheme: Some Key Lessons", World Economy 15(2), March 1992, pages 251-69.

H. Don, B.H. Gunasekera, and Brian S. Fisher (1993) "Australia's Experience with Its Wool Buffer Stock Scheme", in R.D. Reinsel, editor, Managing food security in unregulated markets. Boulder and Oxford: Westview Press, pages 49-66.

Alberto Pasco-Font (1993) "Macro and Micro Implications of a Commodity Buffer Fund: The Case of Peru", Dissertation, University of Pennsylvania.

K.N. Prasad, A.A., Banouei and A. M. Swaminathan, A. M. (1990, 1992) "Weather-Induced Instability in Agricultural Produce with Respect to Buffer Stocks in India and Iran: An Integrated Optimisation and Dynamic Input-Output Model", in A. Chikan, ed. Current trends in inventory research: A selection of papers presented at the Sixth International Symposium on Inventories, Budapest, August, 1990. International Journal of Production Economics, vol. 26. Amsterdam; London and New York: Elsevier, 1992, pages 89-97.

Prasad, K.N. et al. (1994) "Weather and Structural Reforms Induced Instability in Agriculture and Buffer Stocks in India", International Journal of Production Economics, 35(1-3), June 1994, pages 53-63.

[In stabilizing effects of weather uncertainties and recently introduced structural reforms on Indian agriculture and buffer stocks have been examined in this paper. The study is based on an empirical exploration in terms of an integrated parametric programming and dynamic input-output model. It analyzes absolute values of the optimal results, their deviation ratios and coefficients of variation. It reveals all pervasive effects of uncertain weather. When structural reforms are specially introduced in the model, instability in the agricultural sectors, buffer stocks and the overall economy shows mixed results. Coauthors are A. A. Banouei, C. V. Achuthan, and R. G. Parkar.]


Stephen Devadoss, Shuangling Li and James Jones (1997) "A Stochastic Simulation Analysis of the Effects of Indian Wheat Production Instability on the World Wheat Market", Journal of Policy Modeling, Vol. 19 (4), August, p.375-79.

[Adverse weather factors in India augment the instability in wheat supply and trade. Consequently, India's wheat trade is a classic example of stochastic supply being the dominant factor in determining trade flows. This study analyzes the effects of random fluctuations in India's wheat supply on domestic and world price variability and trade flows of India and major exporters and importers by using stochastic simulation analysis. Trade mitigates price variability and, thus, acts as a buffer stock program in reducing price variability. The results show that production shortfalls (surpluses) in India benefit wheat exporters (importers) and hurt importers (exporters).]

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S. Griffith-Jones, 1989, "Kaldor's Analysis of International Monetary Reform" Cambridge Journal of Economics, March.

J. Spraos, 1989, "Kaldor on Commodities" Cambridge Journal of Economics, March.

Anthony P. Thirwall, 1987, Nicholas Kaldor. New York: New York University Press.

Ferdinando Targetti, 1989, Nicholas Kaldor: The economics and politics of capitalism as a dynamic system. Oxford: Clarendon.

Robert W. Dimand and Mary Ann Dimand (1990) "J. M. Keynes on Buffer Stocks and Commodity Price Stabilization", History of Political Economy, 22(1), Spring 1990, pages 113-23.

[John Maynard Keynes's 1938 paper on buffer stocks has long been recognized as a trailblazing work. This paper was part of a longstanding concern with the subject. Keynes's 1923 paper is the earliest cited in D. Newbery and J. Stiglitz (1981). A memorandum written by Keynes during the Second World War (published in 1974) displays analytical insights that anticipate later stabilization theory. Publication of Keynes's Collected Writings makes available his work on commodity markets from India Office and Treasury memos and previously scattered publications. This paper establishes Keynes's pioneering role in the fields of commodity price stabilization and optimal storage, examining the nature of his contributions in these areas.]

Paul Mizen and John R. Presley (1994) "Buffer Stock Ideas in the Monetary Economics of Keynes and Robertson", History of Political Economy, 26(2), Summer 1994, pages 193-202.

Gabriel Palma (1994) "Kahn on Buffer Stocks" Cambridge Journal of Economics, 18(1), February 1994, pages 117-27.

[After Kahn's death an unpublished manuscript and other writings on the subject of buffer stocks were found among his papers. For Kahn, the crucial issue was that commodity price instability affected seriously (and unnecessarily) not only producers but also consumers and the world economy in general. He argued that buffer stocks were necessary and that their main function should be to compensate for fluctuations in demand and supply of primary commodities. From this point of view, they would only be able to make marginal contributions to the problems of the chronically low income of many primary producers, and of the possible one-and-for-all change in the relation of demand and supply. [development, primary commodities, international coordination, export-led growth]

Panos Varangis and Don Larson (1996) "Dealing With Commodity Price Uncertainty", World Bank Working Paper No. 1667.

[Liberalization in commodity markets has brought profound changes in the way price risks are allocated and managed in commodity subsectors. Price risks are increasingly allocated to private traders and farmers rather than absorbed by the government. The success of market reform depends on the ability of the emerging private sector to make full use of the available range of modern commodity marketing, price risk management (such as futures, options, swaps, commodity bonds, and so on), and financing instruments. Because farmers do not generally have direct access to these instruments, intermediaries must be developed. Larger private traders and banks are in the best position to become these intermediaries.  Preconditions needed for accessing modern commodity marketing, price risk management, and financing instruments are:

Creating an appropriate legal, regulatory, and institutional framework.
Reducing government intervention that crowds out private sector involvement.
Providing training and raising awareness.
Improving creditworthiness and reducing performance risk.

The use of commodity derivative instruments to hedge commodity price risk is not new among developing countries. The private sector in many Asian and Latin American countries, for example, have been using commodity futures and options for some time. More recently, commodity derivative instruments are being used increasingly in several African countries and many economies in transition. And several developing and transition economies have sought to establish commodity derivative exchanges.]

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